The 3 per cent increase in the rates of stamp duty land tax since 1 April 2016 has brought a new wave of tax avoidance schemes.
This is according to accountancy RSM, which found the change to stamp duty resulted in those buying second homes and buy-to-let properties being targeted with a growing number of schemes that purport to mitigate stamp duty.
Karen Clark, tax partner in charge of the London private client team at RSM, said similar schemes were popular a few years ago but had largely disappeared as HMRC successfully challenged them and closed the loopholes.
Most of those who participated in such schemes have had to pay the full stamp duty liability, interest on late payment, penalties in some cases, as well as the fees paid to the promoter of the scheme, Ms Clark said.
A simple Google search reveals a handful of companies that, once again, offer structures which claim to save stamp duty on property purchases for an upfront fee, although actual details of their schemes are sketchy.
Almost certainly, Ms Clark warned such schemes will be challenged by HMRC.
Ms Clark said: “It is perhaps not surprising that there has been a renewed interest in such schemes due to the sheer complexity of the new stamp duty land tax rules for second and subsequent properties and the potential for ‘unfair’ consequences.
“Many conveyancing lawyers do not understand the new rules sufficiently to be able to advise their clients, so we have seen cases of purchasers potentially paying too much stamp duty as the conveyancer errs on the side of caution, or being told to take SDLT advice elsewhere.
“This may push the purchaser to seek ‘advice’ from one of the scheme promoter companies rather than from a more conventional tax adviser or lawyer who understands the new rules.”
A spokesman for HM Revenue & Customs, said: “Avoidance schemes do not work.
“Users end up having to pay all the tax due plus interest and many will be worse off than if they had just paid the right tax up front. Avoidance does not pay.”
In December, HM Treasury had to clarify how higher stamp duty rates will apply to purchases of additional residential property post 1 April 2016 and how to avoid the extra charge.
It was in the Autumn Statement that then chancellor George Osborne announced a 3 per cent premium on stamp duty for buy-to-let investors and those buying second homes, aimed at raising £1bn by 2021.
HM Treasury stated higher rates of stamp duty will only apply to purchases of additional residential property which complete on or after 1 April 2016.
If contracts are exchanged after 25 November 2015 then the higher rates will apply if the purchase is completed on or after 1 April 2016.
However, if contracts were exchanged on or before 25 November 2015 but not completed until on or after 1 April 2016, the higher rates will not apply.
