UK taxman cracks down on property tax avoidance schemes
The UK taxman has collected £301.8 million in unpaid property tax due to what is described as an aggressive clampdown on stamp duty avoidance.
HMRC’s new Counter Avoidance Directorate collected the amount in the last year as part of a policy to crackdown on Stamp Duty and Land Tax (SDLT) avoidance schemes.
According to private client law firm Collyer Bristow, the data which was provided to them by HMRC, shows that the policy has been a success.
The Counter Avoidance Directorate was first established in April 2014 in order to bring together HMRC’s work on marketed tax avoidance schemes and policy work on avoidance.
‘The Government’s aggressive clamp down on SDLT avoidance schemes over the last few years is now bearing fruit. The high returns from compliance investigations mean that this area is likely to remain under the spotlight for some time to come,’ said James Badcock, partner at Collyer Bristow.
He pointed out that house prices have soared in recent years- particularly in London and the South East- which means many taxpayers face a substantial SDLT bill on their purchase.
‘Avoidance schemes were being used to reduce SDLT on what for London are relatively modest properties in the £1 million region as well as very high value properties. As well as the Government closing down schemes with legislation, HMRC has tackled previous planning through the disclosure regime, better resourced investigations and litigation,’ he explained.
He also pointed out that whilst in many cases there is likely to be a legal justification for transactions which allowed an SDLT liability to be avoided, HMRC can be expected to challenge the schemes and anyone who is concerned at all should now seek advice.
‘Individuals who decided to engage in the planning because it seemed so easy at the time may not have the stomach for the fight once faced with an HMRC challenge This can be expensive but another critical factor is a climate in which engaging in abusive tax avoidance can cause reputational damage to those in the public eye,’ he added.
Collyer Bristow highlights that changes to the rates of SDLT were introduced in last year’s Autumn Statement. The new rules included the introduction of a graduated rate moving away from the sharp increases resulting from a property just exceeding a threshold which could seem unreasonable.
The change means anyone purchasing a house for less than £937,000 will see SDLT cut or remain the same whilst those buying the most expensive properties are likely to face a higher bill.
