The Tax Advice Network is warning property purchasers to beware of false promises if they hope to avoid stamp duty land tax (SDLT).
The avoidance schemes that were popular when stamp duty land tax was first introduced, declined in popularity as loopholes were closed by HMRC. But recent tax increases mean that some providers of tax avoidance schemes are still making promises they cannot keep.
Mark Lee, Chairman of the Tax Advice Network, says “It’s natural that people buying expensive properties will want to find ways to avoid having to pay tens of thousands of pounds in tax on top of the purchase price. And this makes them susceptible to the snake-oil salesmen who promise the unattainable in exchange for a hefty fee but with no guarantee of success. This fee than just becomes an additional cost on top of the tax and interest where the tax is paid late.
The only simple way to reduce the stamp duty charge is to pay less for the property you are buying. This seems to be happening at the top of the market. A report by PwC suggests that recent increases in the rates of SDLT led to a fall in the number of top-end properties being sold and a decline in income for the exchequer.
The tax take from homes worth more than £1.5 million is reported to have fallen by the equivalent of almost £500 million a year.
The situations in which you can legitimately reduce the tax otherwise payable are very few and far between. Simply buying a replacement main residence rarely affords you any opportunity.
Lee advises that those who are tempted by assurances from slick salesmen should ensure they are aware of the reality of the situation. “The occasions on which you can legitimately reduce the tax otherwise payable are very few and far between. The loopholes are gone and key reliefs apply automatically if you satisfy the relevant rules. By all means take advice re the planning opportunities that may be available but avoid salesmen promoting tax avoidance schemes.”
Notes for editors:
1. The PwC research is reported in The Times 23 February 2017: “Treasury loses £500m in tax raid on luxury homes”
2. Stamp Duty rates are now:
Nil on properties costing up to £125,000
2% on the portion from £125,000 to £250,000
5% on the portion from £250,000 to £925,000
10% on the portion from £925,000 to £1.5 million and
12% on the portion over £1.5 million
An additional 3% is payable on the acquisition of second properties that are not the purchaser’s main residence.
3. HMRC guidance for anyone tempted by tax avoidance schemes: https://www.gov.uk/guidance/tax-avoidance-an-introduction
4 – The Tax Advice Network was established at the end of 2007 and is now in it’s tenth year of operations. It has dozens of members including a number who can give legitimate tax planning advice re stamp duty land tax.
5 – Chairman, Mark Lee, is a former tax partner at BDO and a former chairman of the ICAEW Tax Faculty.
6 – The Tax Advice Network website is highly ranked by search engines eg: for ‘tax advice’, and attracts thousands of enquiries a month.