In HMRC v DV3 Regent Street Ltd FTC/48/2011 [2012] UKUT 399 (TCC) a Stamp Duty Land Tax avoidance scheme worked - briefly.

The scheme took advantage of sub-sale relief and partnership provisions. The Upper Tier Tax Tribunal considered the component parts and decided that it worked. The mechanics are not reported because the rules have changed since this scheme was implimented in 2006.

We have included a summary here because this is the type of planning that the General Anti-Abuse Rule proposed for introduction next summer might wish to counter. Whether it will actually do so will have to be tested by the tribunals in due course. What is also interesting is the Judge's admission that a loophole existed because the legislators did not know how to tax a partnership.

Mr Justice Henderson sums up the result in the final paragraph of his judgment:

"The result is no doubt one that Parliament would not consciously have intended had the facts of the present case been drawn to its attention. But, in respectful agreement with the FTT, I consider that this is the result which follows from a proper construction of the relevant statutory provisions and their application to the undisputed facts. It is also worth noting in this connection that the partnership provisions in Part 3 of schedule 15 have undergone considerable evolution since their introduction in 2004. Mr Thomas told me, and Mr Gammie did not disagree, that if the transactions in the present case had taken place four months earlier, the effect of the previous formula for computation of the consideration in paragraph 10(2) would have been to impose a charge to tax on the Partnership based on the full consideration of £65.1 million. Similarly, if the relevant transactions had taken place a few months later, they would probably have been caught by anti- avoidance provisions in sections 75A to 75C of FA 2003 which were enacted in relation to disposals taking place on or after 6 December 2006. Thus the loophole of which the Company and the Partnership have, if I am right, succeeded in taking advantage was open for only a short period, and it appears to reflect a period of considerable legislative uncertainty about how to deal with transfers involving a partnership."

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