SDLT – Planning Technique in the Tax Tribunal
As has long been anticipated, a stamp duty land tax (SDLT) planning technique, which relied upon the use of sub-sale relief and the rules dealing with partnerships, was heard in the Tax Chamber of the First-tier Tribunal last week.
The technique was used in order to achieve an SDLT saving in excess of £65 million. The planning relied on a combination of two reliefs. Broadly, sub-sale relief operates so that, on a transfer of property from A to B which is immediately sub-sold to C, the intermediate purchaser, B, does not have to pay SDLT as that transaction is disregarded for SDLT purposes. The expectation behind the legislation is that C will fully account for the SDLT. However, this planning combined sub-sale relief with the special computational rules for transfers to partnerships so that the transfer to C also escaped an SDLT charge.
HM Revenue and Customs (HMRC) are arguing that the tax planning does not work because B, as the intermediate purchaser, had not acquired an interest in the property which could be transferred to the partnership. It will be interesting to see how the Tribunal interprets the various provisions dealing with sub-sales and partnerships.
A decision is expected early next year and possibly in February 2011.
A number of SDLT planning techniques have been devised by taking advantage of the notoriously difficult (and rather badly drafted) SDLT partnership legislation and sub-sale relief. Depending upon the outcome, this may be the beginning of an avalanche of SDLT cases being brought by HMRC.
Whilst SDLT planning is always being targeted by HMRC, there are a number of other planning arrangements that can be used to reduce (or totally mitigate) the SDLT payable on a property transaction.
1st December 2010