Stamp duty avoidance on a prior land transaction: could it backfire?

[Jaggers]

I am about to purchase a Share of Freehold (SOF) from my freeholder but I am aware of some oddities that have gone on in the past and I would like to know whether these previous (mis)dealings could in any way affect my current purchase. Let me explain:

1. the freehold (FH) currently includes a flat (on which no lease has been granted) so the freeholders will do a leaseback to themselves before we purchase into the freehold. As our subsequent purchase will be under 60k there will be no Stamp Duty Land Tax (SDLT) to pay, and we believe the leaseback is also exempt.

2. the FH was sold some 4 years ago from a Limited Company to private individuals by way of trust deeds (consideration was > 500k). These trust deeds were not stamped and the Land Registry transfer documents simply declare the consideration to be under 60k. I have been told verbally that no stamp duty was paid on this transaction.

Having read what I can about Stamp Duty, the activities carried out in (2) worry me. My questions are therefore:

A. If (2) is unravelled later down the line, could the repercussions affect our present purchase of the SOF?

B. Is there any way a Limited Company could somehow sell assets to seemingly unconnected individuals without these purchasors incurring stamp duty taxes on the consideration?

I would be very grateful for any comments or suggestions. Thanks, Jon.

[Ian McTernan CTA]

1. You cannot lease an asset to yourselves- this is a legal nonsense.

2., a and b- I think you collectively need to seek legal advice before proceeding any further to ensure everything is put right and all documents are proper, otherwise you could have great difficulty in establishing proper title in the future and selling the property could prove difficult or even impossible.

Ian McTernan CTA
McTernan Associates Ltd
Chartered Tax Advisers
ian@imcternan.com