HMRC has issued Spotlight 43, Stamp Duty Land Tax avoidance: misleading advertising. This followed a ruling by the Advertising Standards Authority (ASA) that a promoted SDLT avoidance scheme was misleading.
HMRC continue to make use of the ASA in the fight against what it considers abusive tax avoidance.
The ASA have ruled that the website of the promoter “misleads by omission” as it failed to mention the various government tools and policies aimed at counteracting the avoidance the scheme sought to achieve.
HMRC understand that under the scheme, which claimed to use government approved statutory rules to reduce SDLT bills on residential property purchases by 60%:
- A series of transactions takes place including the setting up of a trust, loan between purchaser and trust, and grant of a lease from purchaser to trust.
- The steps aimed to get the purchase of the property into the mortgage providers ‘security interest’ SDLT exemption.
- The plans didn’t involve any input from the seller and it was claimed there was no need to notify HMRC.
- The provider charged 40% of the SDLT saved, generating the 60% saving for the customer.
HMRC advise in the spotlight, that these arrangements fall under the meaning of avoidance and may be disclosable under the Disclosure of Tax Avoidance Schemes (DOTAS).
The ASA ruled that the claims made around the scheme are misleading and must be withdrawn.
In the ASA hearing:
- The promoter insisted that HMRC do not understand the scheme but they did not provide the ASA with enough evidence to support this contention.
- The extract of a supporting opinion of a tax barrister, stating that no notification under DOTAS was required, was not sufficient evidence to support this view. This claim was considered misleading without sufficient supporting evidence.
- The website stated that SRA regulated solicitor firms would deal with the implementation and that under the SRA regulations they must act in the best interests of customers. The ASA found that this implied there was no risk of challenge and that the scheme may have been approved by the SRA.
- The advert was misleading because it did not mention the General Anti-Abuse Rule (GAAR).
HMRC deem this ruling to set an example for other promoters about similar schemes. The use of the ASA appears to be a valuable tool for HMRC as it assists in removing the temptation to enter into potential schemes: the promoters are unlikely to release details of a scheme and technical analysis of a scheme they believe works to the ASA, as that would effectively make the IP worthless as it would be public.
An email address is provided for taxpayers who wish to get out of such schemes and do not already have a contact at HMRC.
Links
Our guides:
Anti-avoidance: HMRC's spotlights
SDLT & residential property (dwellings): higher rate
DOTAS: Disclosure of tax avoidance schemes
General Anti-Abuse Rule - GAAR - at a glance
General Anti-Abuse Rule - GAAR (subscriber version)
External link: Stamp Duty Land Tax avoidance: misleading advertising (Spotlight 43)