Middle class home-owners are adopting a tactic used by the super-rich to avoid paying stamp duty, it’s been revealed.
Some companies are offering services that they claim could save mortgage holders thousands of pounds.
These are through Stamp Duty Land Tax mitigation schemes that reduce moving costs when a home-owner remortgages and changed address.
The companies claim to be acting within the law, but that is disputed by Her Majesty’s Revenue and Customs.
HMRC has said it will recover all monies owed.
Under the scheme, prior to the purchase of a house, a buyer sets up a company of which he or she is the sole director.
When the purchase is completed, the company has a legal right to buy that property.
As a contract has been drawn up for the company to buy the property, mitigation experts can argue a full land transaction has not taken place and therefore stamp duty is not payable at this point.
The company’s right to buy may last for more than 100 years but this is never taken up.
In the deeds, the purchaser is named as the rightful owner and is on Land Registry documents.
Purchasers have to send a letter telling HMRC what they have done.
It is argued that, under the 2003 Finance Act, this gives the taxman nine months and 30 days to launch an investigation, after which the purchaser is in the clear.
Tax litigation expert Matheu Smith, of Central London firm Keystone Law, said: “To say that after nine months you’re in the clear is misleading because it depends what you have done.
“We are being asked to advise purchasers who have received demands from HMRC for payment of stamp duty and interest on it several years after they bought a property.
“The fact that there has been no successful HMRC challenge yet –well, it’s the “yet” that is important.
“There are challenges currently going through the courts that relate to tax planning schemes that were being used five or six years ago and HMRC may yet win.
“In any event, the legislation has been changed since then to make it more difficult to avoid paying stamp duty and the newer planning schemes have not yet been tested in the courts.”
Andy Parker, of Birmingham- based Parker Chartered Accountants, said: “There’s no such thing as risk-free tax planning. It can be a gamble and you need to take the very best advice.”
A spokesman for HMRC: “In some cases this is because they reflect an incorrect understanding of the way the law works. In others they are caught by anti-avoidance rules.
“The 2011 Finance Act included measures to put beyond doubt that a number of widely marketed schemes cannot be used to reduce SDLT liability.”
