Stamp Duty Avoidance Scheme

Stamp Duty Avoidance Scheme

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I had a contact recently from someone who has had a demand letter from the HMRC for stamp duty he didn't pay after using a SDLT avoidance scheme.....4 years ago! The scheme provider has long gone and the HMRC have given him 30 days to appeal. Has anyone else encountered this? I don't really get involved in this anymore though I have in the past and my understanding was that the HMRC only had 12 months to review these schemes. Does my contact have any grounds to not pay? Appreciate any help on this.

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By duncanedwards
29th Dec 2014 22:26

Not an area I'm familiar with but ...
http://www.hmrc.gov.uk/manuals/chmanual/CH56900.htm

3 Assessment of an amount due from a person in a case involving a loss of tax brought about deliberately by the purchaser or by another person acting on the purchaser’s behalf, or a person who was a partner of the purchaser at the relevant time.

20 years after the effective date of the transaction.

FA03/SCH10/PARA31(2A) as amended by FA09/SCH51/PARA15(6)

This may be relevant:

http://old.tax.org.uk/attach.pl/9771/11435/110117%20SDLT%20Avoidance%20S...

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By ShirleyM
30th Dec 2014 08:42

Use of avoidance schemes

It's good to know that HMRC are pursuing the tax avoided by use of ineffective schemes. It may help reduce the deficit and give the next generation a less bleak future.

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Replying to paul.benny:
By TimCoe
29th Jul 2015 14:43

Do you have shares in HMRC?

The deficit is caused by ridiculous and irresponsible spending of billions over many years. If councils were businesses they'd all be bankrupt in a couple of months. Talk about inefficiencies and lack of accountability. Example - Croydon Council's New Head Office Building [location and design]. If SDLT wasn't so draconian then there'd be no need to seek out ways to save on what is already heavily taxed money.

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By Justin Bryant
30th Dec 2014 11:25

At the risk

Of annoying ShirleyM, this will be an effective SDLT scheme if the taxpayer has relied on professional advice and the assessment is beyond the 4 year time limit in the above link (as the taxpayer would then not have been “careless” of course). It’s a no-brainer to appeal this for this reason. Ms Hodge got rather annoyed with HMRC recently as HMRC let some of the Liberty income tax scheme people slip through this net (presumably they fully disclosed that scheme on their tax return, so the shorter 12 month enquiry window applied). http://www.dailymail.co.uk/news/article-2838608/Taxman-let-stars-duck-10...

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By ShirleyM
30th Dec 2014 12:22

It was this comment ....

"The scheme provider has long gone..."

... that made me question the effectiveness of the scheme the OP referred to. Some scheme providers do seem to disappear when things turn sour, but hang around continually flogging their wares while everything is hunky dory.

It makes me wonder how professional the 'professional advice' really is. Maybe the fact that they disappear is indicative that the advice may not have been 'professional' at all?

ps. Thanks for caring, but I'm not annoyed by your comments, Justin. I enjoy a good old debate.

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By Justin Bryant
30th Dec 2014 12:38

Thank you
If only Richard Murphy was that polite and courteous with his comments he might get a bit more respect for his views. This SDLT scheme would almost certainly have relied on a positive up to date opinion from an SDLT specialist tax barrister (the scheme provider would not have been able to flog the scheme without this) and so I reckon there is every chance of arguing E Mariner v HMRC [2013] TC03039 in support here.

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By ShirleyM
30th Dec 2014 12:50

This is one of the problems with such schemes

The tax barrister may know full well that the scheme wouldn't stand up to scrutiny, but greed overcomes everything else. Apparently, these particular tax barristers have nothing to lose as their insurance is not individual insurance, and the resulting increased costs of insurance are borne by all members ... or something along those lines.

There may also be circumstances where the tax barrister is given one set of criteria which is approved by the barrister, but a different set of criteria is used in the scheme.

Maybe the new rules regarding monitoring of tax avoidance agents will help. I do think that barristers and agents who flout the law and give bad 'professional advice' should be held to account.

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Stepurhan
By stepurhan
30th Dec 2014 13:03

Devil in the detail

What date was the transaction and what date was the demand raised. Even if it is acceptable as non-careless error, the dates could be enough to catch it regardless.

But the question of whether it is a deliberate action is, I think, still open to debate. That will depend on the details of the scheme itself, and whether it could realistically have been anything other than trying it on. Whilst claiming non-careless is the basis for an appeal, is the scheme provider closing its doors so soon an indicator of deliberate action by someone acting on the taxpayer's behalf?

The Daily Mail report is not the most reliable of sources (the opening talks about "while the taxman raids ordinary people's bank accounts". That is, at best, a proposed power, so that headline statement is factually wrong) so I wouldn't rely on their reporting alone as saying abusive tax schemes are in the clear after standard deadlines.They also specifically mention the 12 month ordinary enquiry deadline, so it relates to ordinary tax returns, not SDLT, and full detailed disclosure (if discovery is not available). So not necessarily a transferable case even if reported entirely accurately.

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By Justin Bryant
30th Dec 2014 17:13

Well

The CIoT are on record as saying in the link below that "...in principle, SDLT schemes may be a valid option provided that clients are properly advised..." and I could not agree more. http://www.tax.org.uk/Resources/CIOT/Documents/2012/04/SDLT%20schemes%20...

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Stepurhan
By stepurhan
31st Dec 2014 08:53

In principle

They say that they are a valid option "in principle", but the linked document could hardly be called a ringing endorsement for taking advice meaning you are in the clear. Indeed, before this sentence, they cover several reasons why you may not be. The sentence you quote also continues by saying that such schemes are open to challenge regardless.

Proper documented advice backed by genuine robust counsel's opinion is likely to prove a good basis for an appeal against out of time assessment (though there is still a need to check that it genuinely is out of time). If that is not clearly in place, then the OP's client is not unequivocally in the clear.

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By ShirleyM
31st Dec 2014 09:23

Some 'advice' is blatantly wrong

I am thinking about 'working wheels' in particular. Justin is correct in saying that seeking professional advice can be a defence. The working wheels scheme was a fraud, as it was based on deception but Chris Moyles got away with fraud because he had taken 'professional advice'. Why was the adviser not held to account for giving blatantly incorrect advice?

If this happened in any other circumstances I am sure the adviser would have the book thrown at them and a massive claim made against their PII.

This seems to be the basis for tax avoidance. If the scheme works (or isn't even investigated) then the adviser, the tax barrister, and client are quids in, and the taxpayer loses. If the scheme is proven to be ineffective, the adviser and the tax barrister are still quids in, but the taxpayer still funds the legal action and the investigative HMRC employees.

It seems to be all 'carrot' for the promoters and all 'stick' for the taxpayer. There isn't a disincentive for the promoters.

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By Justin Bryant
31st Dec 2014 10:35

I can assure you that
There was no fraud whatsoever in the working wheels scheme. It was fully disclosed to HMRC and had a supporting opinion from a well known tax QC. Contrast this to the Vantis charity tax fraud scheme.

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Replying to Red Leader:
Stepurhan
By stepurhan
31st Dec 2014 10:58

Not fraud

Justin Bryant wrote:
There was no fraud whatsoever in the working wheels scheme.
Interesting statement. The individuals involved were represented as motor traders. They did not actually engage in trading and even admit they solely entered the arrangement "for no other purpose other than to achieve a tax saving" (Quote from Mr Moyles, page 13, para 44 of appeal judgement). Claiming to be motor traders would therefore appear to be a lie from which they expected to receive financial gain, the very definition of fraud. They may have avoided prosecution for fraud on some technicality, though I confess I don't understand why. However, to say there was "no fraud whatsoever" seems like rather a stretch given the tribunal found no trade existed. Since they have quite comprehensively lost in the courts, the supporting opinion from a well known tax QC would appear to be have been proved entirely worthless. If the opinion had genuine value, they should not have lost surely.
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By ShirleyM
31st Dec 2014 10:56

Isn't it fraud ...

To claim non-existent losses by saying he had a self-employed business, when he didn't?

Would it be fraud to make an insurance claim saying your cash had been stolen, when it hadn't? Would it be fraud to claim losses against non-existent businesses if a tax avoidance scheme were not involved?

ps. I think you already know what value I put on 'supporting opinion' from well known tax QC's! Some are in it for the money, and would say black is white if it paid well enough! They are untouchable.

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By ShirleyM
31st Dec 2014 11:15

Please explain, Justin.

The supporting opinion was worthless, and giving false information to HMRC doesn't excuse the fraud, it confirms it!

Why do you say that it wasn't a fraudulent claim? 

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By Justin Bryant
31st Dec 2014 11:42

ShilreyM
Ask any criminal lawyer and they will tell you that as there was no concealment or intent to deceive then there is no fraud. As for allegedly falsely representing oneself as a motor trader, there is plenty of case law on agents acting on behalf of principals etc. I can be a motor trader sitting on a sunny beach somewhere if I have other (probably better qualified) people doing the actual nitty gritty work for me. As long as actual motor trading is done (which could be by someone else acting on my behalf), then all should be fine there. Again, contrast all this with the Vantis fraud, where there was clearly not full disclosure to HMRC and (obviously) no supporting tax counsel opinion.

Given past experience, there is no point continuing to debate this, so I will end there.

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Replying to Lone_Wolf:
Stepurhan
By stepurhan
31st Dec 2014 11:54

Explain appeal summary

Justin Bryant wrote:
As for allegedly falsely representing oneself as a motor trader, there is plenty of case law on agents acting on behalf of principals etc. I can be a motor trader sitting on a sunny beach somewhere if I have other (probably better qualified) people doing the actual nitty gritty work for me. As long as actual motor trading is done (which could be by someone else acting on my behalf), then all should be fine there.
The summary at the top of the appeal document I linked to says "whether trade existed - no". Am I misunderstanding this, or does this mean that the court has said the trade itself didn't actually exist? Please also explain how someone could take out a loan where they are not exposed to repayment of that loan (page 12, paragraph 41)

I will grant that you can run a business and get someone else to handle the day-to-day stuff on your behalf. But if the court decides no trade existed then that is not just a case of uninterested proprietor having agents. Equally a loan is, by definition, something that has to be repaid. If the prospect of having to repay a loan is non-existent, then it cannot be a loan and it must be false to describe such monies as a loan. Please clarify how, legally, it is not fraud to do so.

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By ShirleyM
31st Dec 2014 13:20

I think Jutsin has no answer to our questions

It was fraud, and it is time that advisers who promote, aid and abet fraudulent actions are held to account. Naturally, those involved in tax avoidance schemes don't want that!

I know NT Advisers have lost every scheme that went to court. Have they ever had a successful scheme that has gone through an investigation unscathed? If not, then they are no better than the scammers who sold non-existent time shares.

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By mrme89
31st Dec 2014 16:17

Working Wheels

It appears we all have a different take on the word fraud. Fraud aside, it was, at best, dishonest.

 

The more I hear about some of the schemes, the more I think these promoters are nothing but glorified salesmen with wild imaginations. Unfortunately, until they start being held accountable, they will continue to peddle crap to gullible money grabbing clients. 

 

 

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By andrew.hyde
05th Jan 2015 11:03

The F word

With greatest respect to all concerned, I think 'Is it fraud?' is marginally the wrong question.  Surely what HMRC have to ask is 'Will the courts agree that it's fraud', and that will in many cases involve the 'beyond all reasonable doubt' test.

Patently the question is not 'beyond all reasonable doubt' because there are some highly reasonable people here who hold different views.

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By Justin Bryant
05th Jan 2015 11:48

See para 87
"The statement of agreed facts shows that both Mr Moyles and Mr Stennett made at least one purchase and sale in the tax year in which they joined the scheme, and this question (if it arose) should be determined in their favour."
http://www.financeandtaxtribunals.gov.uk/judgmentfiles/j7618/TC03314.pdf
Thus, there is no possibility of fraud there and even if they did not make such a transaction they would have probably lacked mens rea due to following the advisor's advice - like the Vantis charity tax fraud clients.

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By nicstone
05th Jan 2015 14:48

For the OP

Coming back to the original question, there are a number of variables which need to be considered.  Firstly, dates as set out above.  If the assessment is within the 4 year discovery window, you then need to look at what disclosure (if any) was made and whether HMRC are in a position to make a discovery. 

If they are, and it is in time, (and on the correct party) then an appeal is required within the 30 days specified if the client intends to fight on.   If an appeal is not made in time, the tax is due, and the matter is closed.

If an appeal is made, you then proceed with the technical defence of the structure.  If the promoter is not around this may be more challenging, depending on what information your client was provided with at the time.  However, the barrister may be able to assist, for a nice fee of course.  Depending on who the pormoter was, there may be enough affected people to put together some form of association to finance the defence.

The decision will also depend on what planning was undertaken.  HMRC has a fairly good track record in defeating SDLT avoidance (Project Blue having recently been upheld in the Upper Tier).  But not all planning is the same, subtle differences in implementation, for example, can make a big difference to the outcome.

 

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