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SDLT sub-sale scheme thrown out

19 September 2012

A tax tribunal has struck down a Stamp Duty Land Tax (SDLT) saving scheme, which used a combination of an unlimited company as the intermediate purchaser and a distribution in specie of the property by the company to the end purchaser.

The Tribunal’s main grounds were (i) the distribution in specie had been unlawful under the Companies Act, and (ii) applying a purposive interpretation of the SDLT sub sale relief legislation at s45(3) Finance Act 2003, as to what could be caught as chargeable consideration for SDLT purposes.

The decision highlights the recent approach of the courts in challenging tax avoidance. We expect further challenges to sub-sale SDLT schemes by HMRC.

It also highlights the risks posed to advisers which could ultimately impact on professional indemnity insurance for those professionals involved in promoting, implementing and advising on such schemes.

Finally, the facts of this case took place before the introduction of the general SDLT anti-avoidance legislation which further strengthens HMRC’s position against schemes such as these.

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