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HMRC wins £170m stamp duty case

HM Revenue & Customs says it has won a court case to clamp down on a stamp duty avoidance scheme.

New rules have also been laid that force stamp duty land tax avoiders to disclose schemes to HMRC, enabling the body to identify and close them down more quickly.

The decision, at the First Tier Tribunal, is open to appeal, and involved a land duty avoidance scheme promoted by several accountancy firms.

A Vardy group company structured a £7.25m property purchase through a new unlimited company, which distributed the property as a shareholder dividend, arguing that the final purchaser was not liable for £290,000 in stamp duty, as it had paid nothing for the property.

The Tribunal found that the company was liable, as it had not properly declared the dividend, while in reality the ultimate owner of the property had indirectly paid for it.

HMRC says the ruling could save the Exchequer £170m.

HMRC director general of business tax Jim Harra said the victory sent “a clear message to tax avoiders that we will challenge avoidance relentlessly”.

He also called the decision “good news for the vast majority of taxpayers who pay, rather than try to dodge, their taxes. It shows that the courts will see through arrangements which are put in place just to avoid tax”.

“People who are tempted by tax advisers to enter into avoidance schemes should think twice and not be driven by greed into signing up for schemes that are just too good to be true.”

The new regulations will ensure that “subsale” avoidance schemes must be disclosed to HMRC, and that avoidance schemes involving residential property up to £1m and commercial property up to £5m have to be disclosed.

Exchequer secretary to the treasury David Guake added: “This Government has been clear that when someone buys a house in the UK they must pay Stamp Duty. At the Budget we announced a number of steps that we are taking to crack down on people who try to avoid this responsibility.

“Today’s legislation will mean that HMRC will have access to more information about property tax avoidance. They will not hesitate to use it to close down avoidance schemes.

“The Government is totally committed to tackling this kind of tax avoidance scheme and HMRC will take cases through the courts whenever necessary.”

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