Govt to close stamp duty loophole
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Source: Michael Walter/Troika
The Treasury is to clamp down on people who attempt to avoid paying stamp duty on property transactions by setting up offshore companies in tax havens.
Today, as part of the finance bill, Chancellor George Osborne is set to close a loophole which allows people to avoid paying the new 5 per cent rate of tax by registering houses and flats in the name of companies rather than individuals, according to reports.
The company, which is set up in a tax haven, pays the tax in full at the outset but when the homeowner decides the sell the property, they sell shares in the company.
The transaction is not registered with the Land Registry and allows the new buyer to purchase the property without paying the full stamp duty, as the company shares are subject to a 0.5 per cent rate of tax instead of the full 5 per cent stamp duty on conventional sales.
Last month, the Chancellor announced the stamp duty holiday for first-time buyers purchasing properties of up to £250,000 will not be extended on March 24, 2012, branding the scheme a “failure”.
In October, HM Revenue & Customs revealed it is chasing 1,200 people who have used stamp duty avoidance schemes to avoid paying the tax, costing the Government £35m in tax revenues.
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Readers' comments (4)
Exasperated Me | 6 Dec 2011 11:21 am
Would it not be simpler to scrap stamp duty altogether?
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Kevin Archer | 6 Dec 2011 12:59 pm
or perhaps go after the very people who dream up these schemes of self indulgence and then hit them with a surchage. We all avoidance is legal and tax evasion is a criminal offence but i thought these schemes had to be discussed with HMRC BEFORE avoiding the tax.
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Accountant | 6 Dec 2011 4:42 pm
These schemes ARE discussed with HMRC beforehand, and furthermore, the land transactions are reported on the SDLT forms to them, clearly displaying the scheme number. They have 9 months to challenge the use of the scheme, else the scheme works and the enquiry window into the transaction closes.
The schemes are registered under DOTAS (disclosure of tax avoidance schemes) and unfortunately for HMRC and UK plc they all WORK, just not commonly used by Joe Public, only by Well Informed.
The mechanics of each scheme are explained fully to HMRC, and these schemes that are used are displayed by reference to their number on the SDLT form. HMRC are given the ability to issue anti-avoidance by disecting the schemes and putting barriers in the way through legislation, but chose not to as banks and oil companies are easier targets.
Anyway, SDLT is the tip of the iceberg. Avoidance in this area is minute compared to income tax and corporation tax avoidance.
Nice story, but this is chicken feed in respect of lost revenues to HM Treasury under tax avoidance.
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Robert Jones | 15 Dec 2011 4:02 pm
Accountant is right. I have used the services of the site http://www.avoidstampduty.org.uk to avoid stamp duty through a tax planning scheme. It works!
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