SDLT + Loan to Seller

[section 44]

James, that is one opinion. There are alternative opinions and it remains to be seen ultimately what a court would hold the answer to be. The law is not clear and any statute needs to be interpreted. For what its worth, I am aware of such opinions being given post 2006.

To reiterate, I do not like/support such schemes or scheme shops.

However, to purport that your opinion is the actual answer is as misleading as the scheme shops who play down the risks, flaws and arguments against their preferred and favourable interpretation of the law.

If section 75A is, on a proper interpretation of the law, as supportive to HMRC as a strict reading of that provision would suggest then why have HMRC shied away (since 2006) from daring to have the provision put before the courts and be subject to judicial ruling on its interpretation? Perhaps HMRC are concerned that a court would consider section 75A to be too widely drafted to be enforceable on a strict interpretation of it and that they are better off simply threatening with it and hope that tax payers/ their advisers are too ignorant to question it.

[DarrenTMH]

Thanks to James and section 44 for the latest contributions to this particular aspect of this thread, for what it's worth here's the 'word from the top' within our SDLT planning organisation on this:

on HMRC's spotlight 10...
"We are aware of this document and it contains nothing new. It is a fairly standard approach by HMRC designed to put people off either providing or taking advantage of tax planning. Messages of this type have been circulated periodically since the introduction of SDLT in 2003 and the expansion of the anti-avoidance legislation in 2006. To date no test case has been brought by HMRC and sub-sale relief is regularly granted and approved on a range of transactions.

What this article is saying is that HMRC is going to carry out more targeted scrutiny of what they think might be purchases carried out using an SDLT avoidance scheme. This is something they need to be seen to be doing . They could hardly come out and say that they are doing to be doing less to target SDLT avoidance. The crucial point is that there is no reference to a change in the legislation, simply a vague reference to more effort being applied to identifying and contesting cases.

Our view is that if a case is challenged we will defend it and engage tax counsel to construct the appropriate defence. The consensus of opinion amongst Tax Counsel is that the anti avoidance legislation to which the piece refers is ambiguous, poorly drafted and unconstitutional and that it would not stand a vigorous test in court which is why HMRC has not brought one test case under this legislation to date.

However we must take the view that HMRC could be about to re draft the legislation and render our tax planning redundant in which case we will need to revert to Tax Counsel to review alternative planning arrangements in light of any changes in the legislation."

and on James' previous post...
"I have read the quoted text with interest, and thought that I would offer my own thoughts on this:

For a start, as stated previously, this kind of statement is to be expected from HMRC, and is the kind of statement that we have seen before, where they must appear to be ‘doing something’. If you re-read the text carefully, you will notice that none of the language used is definitive – phrases such as ‘Our view is’ seem rather weak in context, and the last phrase “these will be actively challenged, through the courts where appropriate” is quite telling. Basically, HMRC like any government department has only a finite amount of resources, and the anti avoidance legislation is so ambiguously worded at present that they are reluctant to risk mounting a challenge to the planning with all of the attendant time, effort and cost that this would potentially involve. The fact remains that the planning in question has been extant for some time now, and HMRC are aware of it – we know as we ourselves disclosed to them that we would be using it relatively recently. I should also like to add that we have opinions from counsel dated well after the anti avoidance measures came into force in 2006.

It is certainly possible that as time goes on HMRC will get the relevant legislation re-drafted and tighten up the law, at which point we would re-examine the position, but at present we see no major changes being brought about by this latest Spotlight."

I guess this is quite similar to section 44's comment above.

I think we've hijacked this thread more than enough with this subject matter which is not really what the OP intended this thread to be about, so perhaps we should leave this here for now

James, I'd still like to discuss some of the aspects you raised in your first post here - if you are interested please get in touch with me, I guess you have my contact details

best regards

Darren Ferneyhough

[apractitioner]

Section 44..

Absolutely it's an interpretation of the law and of course tax planning is all a matter of opinion by default. Said opinions only being as good as the questions that are asked.

S.75A may not have been tested before the courts, but in relation to H&W planning the 8 page technical analysis given to identified scheme users accompanying the tax demand makes quite plain the threat of penalty if HMRC is successful and the weaknesses in the planning.

Bearing in mind that the vast majority of users of these schemes are Mr & Mrs Smith purchasing in £250k-£500k bracket (in contrast to higher value purchases which will implement more technically challenging planning) it is unsurprising that the other side in the lack of application of 75A is a reluctance on behalf of the client to appeal a demand and the reluctance of a promoter to assist in such an appeal. No appeal = no trip to Tribunal.

DarrenTMH....

Any scheme promoter who says something is "approved" by HMRC should be treated with appropriate caution.

I'll drop you a direct message

James

[Incredulum]

It's interesting how SDLT schemes have suddenly blossomed everywhere. A year ago there were a couple of schemes that didn't work (one involving sharia financing, and another involving an IIP trust and a partnership).

Now there are all sorts of good ideas around that actually work - not sure they would be helpful for individuals, but certainly there is no reason for a corporate to pay SDLT at the moment.


I would say that any SDLT scheme with a positive opinion from Patrick Cannon needs a good bargepole and a large pinch of salt. A positive opinion from somebody like David Goy instead would be far more compelling...

[section 44]

I wouldn't disagree although your comments on something actually working raises an interesting question for me. What does it mean?

A lot of people equate no successful challenge to date with something working. But you could say that the taxpayer would need to be a in position where HMRC could not assess (with support from a court from which there is no appeal) that no tax is due. Given the age of SDLT, even with good technical arguments, that could be a big ask.