The General Anti-Abuse Rule (GAAR) Advisory Panel has released an opinion which has concluded that a property purchase which was undertaken through trusts and involving a peppercorn lease was not a reasonable course of action.
- The taxpayers agreed to purchase a residential property for £1m.
- Following research, the taxpayers approached a promoter of Stamp Duty Land Tax (SDLT) avoidance schemes.
- The taxpayers along with a promoter and their solicitor agreed to structure the purchase by creating trusts, creating a peppercorn lease and undertaking an Alternative Finance Agreement which was supposed to reduce the consideration chargeable to SDLT from £1m to £1.
The GAAR Advisory Panel concluded that neither the entering into nor the carrying out of the tax arrangements were a reasonable course of action as:
- The claimed result of the transaction, that no SDLT was due, was not consistent with the legislative principle that SDLT applied to what was actually paid for residential property.
- The insertion of parties and steps between the buyer and seller in the property transaction was abnormal and contrived.
- While there was no shortcoming in the legislation, the arrangements were designed to sidestep the legislative aims.
- The claimed result of the arrangement, that no SDLT is due, was contrary to the legislative intention that a £1m property purchase attracted substantial SDLT.
- The arrangements were not consistent with established HMRC practice.
Useful guides on this topic
General Anti-Abuse Rule: GAAR at a glance (freeview)
This note looks at the key features of the General Anti-Abuse Rule (GAAR) contained within the Finance Act 2013 and the basics of what you need to know about the provisions it contains when considering tax planning.
General anti-Abuse Rule (GAAR) (subscriber version)
What is the General Anti-Abuse Rule (GAAR)? When does it apply?
SDLT: At a glance, Stamp Duty Land Tax, rates & allowances
What is Stamp Duty Land Tax (SDLT)? What are the rates of Stamp Duty Land Tax (SDLT)?
SDLT: Stamp Duty Land Tax, start here
What is SDLT? What are the SDLT rates? What is exempt from SDLT? What reliefs are available? When are returns due? When can you amend a return?
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