7.12.11 Revenue demands law changes on Disclosure of Tax Schemes relating to SDLT.

The Government has demanded that firms selling schemes that help buyers avoid Stamp Duty Land Tax (SDLT) on property disclose more of those schemes to the Revenue. Her Majestys Revenue and Customs (HMRC ) announced in the Finance Bill 7.12.11 the law changes to the Disclosure of Tax Avoidance Schemes (DOTAS) to help them identify the promotion and use of certain strategies. It has been estimated that SDLT avoidance schemes cost the exchequer between half a billion and a billion pounds a year. Finance website This Is Money reported that every house on a London street with an average price of 35 million was held by an offshore company. The Government has now changed the (DOTAS) regime for SDLT in a way that will force more advisors to disclose the existence of more schemes. Schemes that were exempt from disclosure will no longer be exempt. A Treasury note said: "These changes will increase HMRC's awareness of SDLT avoidance schemes and those using them. They will support HMRC's anti-avoidance strategy to prevent, detect and counter tax avoidance. Here at Cornerstone Tax, we applaud HMRCs decision to enforce disclosure of all schemes, although note that there is a discrepancy as to what HMRC terms avoidance, which in their view groups together both avoidance, which is legitimate, and what we all know as evasion which is not. The two are not the same and we urge HMRC to consider them as discrete entities when looking at transactions that do not reap the SDLT amounts that HMRC believe to be the true value. There are, however, some practising advisors that are operating under the guise of avoidance but by not disclosing to the Revenue their activities, are moving their clients from a position of avoidance to evasion and placing them in a situation of risk that could have repercussions for up to 20 years. Cornerstone Tax have always disclosed each transaction to HMRC as the correct and responsible practise when working on behalf of their clients. When schemes are disclosed to HMRC by users or advisors they are given a scheme reference number, which helps HMRC track their use. This allows us to also maintain a working relationship with HMRC whilst liaising in technical debate on our position relating to our clients transaction should an enquiry be raised. Commenting on the changes in PWCS press release on the changes, Paul Emery, PWC Real Estate Director, said: Bringing SDLT sub-sale schemes into the disclosure regime is no surprise given HMRCs stated frustration at the continued use of these schemes. This is despite the introduction of wide-reaching anti-avoidance legislation in 2006 and public statements that HMRC are actively litigating these schemes. The first such case was found in favour of the taxpayer, although that particular case, which pre-dated the 2006 anti-avoidance, is currently under appeal. HMRCs problem has been that, in some cases, the use of these schemes is not disclosed because the promoters claim there is no tax charge to disclose. As such, in the absence of time-consuming enquiries of the Land Registry, if HMRC havent been told of a transaction, they cant challenge it. Some might argue that specifically exempting promoters from disclosing these schemes in the first place only encouraged their continued use. David Hannah ACA CTA, Principal Consultant for Cornerstone Tax said: "The Revenue is making a concerted effort on stamping out aggressive tax avoidance. The ongoing clampdown on SDLT planning is to allow HMRC to gain more information about the usage of such schemes which they clearly dont already have. The knowledge and understanding of these will place them in a stronger position when challenging schemes which HMRC believe do not currently work. In my mind, the only true advantage HMRC will have with most schemes operating at the moment is if the firm or advisor has not disclosed their activities to the Revenue in the first instance. We therefore wish HMRC the best of luck with those firms that are not operating legitimately, but the true impact of this legislation will be clearer when the results of some of the ongoing court cases regarding SDLT avoidance have been decided.

ENDS