Stamp duty avoidance

The Sunday Times reports that HMRC is investigating cases of homeowners suspected of using stamp duty mitigation schemes which take advantage of loopholes to reduce the amount of tax due. Earlier this month a City banker, Edward Allchin, lost a case with HMRC over a scheme that used sub-sale relief to cut stamp duty on the purchase of a £2.5m town house. A tribunal ruled that banker's technical tax arrangement did not qualify for the relief making him liable for nearly £90,000. A further 190 homeowners have been investigated for using similar schemes and will now have to pay a total of £7m. HMRC can review purchases made up to six years ago and is sending "discovery letters" to households it suspects may have underpaid. Accountants have warned that some homeowners, who believe they have paid the correct tax, get caught out as in some reported cases, solicitors have entered a lower value for the house in the stamp duty return, resulting in a reduced payment. Richard Turner, corporate tax manager from Menzies, the accountant, said: "While the majority of property transactions are relatively simple, the more complex the case, the higher the risk of error being made."

The Sunday Times, Money, Page: 6