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HMRC wins £68m stamp duty avoidance case

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15th Aug 2013
Freelance journalist
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HMRC is celebrating a legal victory after the Court of Appeal ruled against a £68m scheme used to avoid stamp-duty land tax (SDLT), overturning a previous ruling by the upper tribunal.

HMRC has won four other major SDLT cases this year, worth almost £400m.

The latest scheme involved the purchase of the former Dickens and Jones building in Regent Street, London by DW3, a property developer, which tried to avoid paying £2.6m SDLT by selling the leasehold interest to a partnership in which it had a 98% interest.

The upper tax tribunal ruled that the scheme worked. HMRC took the case to the Court of Appeal. 

In his judgement (The commissioners for HMRC and DV3 RS Limited Partnership, EWCA 907), Lord Justice Lewisin, said that DW3 claimed to have "devised a simple and elegant" scheme to avoid SDLT but "in the real world" the company had acquired a chargeable interest in the property and was therefore liable to pay tax.

HMRC said the appeal ruling could set a precedent for 87 other cases.

David Gauke, exchequer secretary to the Treasury said the ruling was an "excellent win" that will protect taxpayers' money.

Tax expert John Christian of law firm Pinsent Masons, said: "The taxpayer's successes before the First Tier and Upper Tribunals have vanished before an elegant interpretation of the legislation by the Court of Appeal."

Replies (26)

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By Justin Bryant
16th Aug 2013 10:01

Elegant interpretation

"Elegant interpretation" is putting things very politely. Most SDLT advisers consider the CA decision to be a pretty poor one (i.e. no thorough/proper analysis of the legislation - unlike in the Upper Tribunal) and methinks the taxpayer will go on to the Supreme Court.    

 

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Replying to MissAccounting:
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By doorsteps
19th Aug 2013 10:33

hold your horses

Justin Bryant wrote:

"Elegant interpretation" is putting things very politely. Most SDLT advisers consider the CA decision to be a pretty poor one (i.e. no thorough/proper analysis of the legislation - unlike in the Upper Tribunal) and methinks the taxpayer will go on to the Supreme Court.    

 

 

Almost certainly with 68 million at stake. A relatively small contribution from participants towards barristers and onto the next stage. No doubt this "success" will become another HMRC marketing tool

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Replying to MissAccounting:
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By KenKLM
19th Aug 2013 11:37

Pay the tax !

I have no sympathy ... these are some of the wealthiest in the country avoiding paying a fair amount of tax . I am sick of picking up the "extra" bill for these people and have no time for the accountants that devise these so called "clever" schemes . Glad one has failed .

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By the_Poacher
17th Aug 2013 07:12

Clamp down!
The government needs to take a more robust approach to tackling complex tax avoidance schemes. More powers for HMRC, more better trained staff and penalties for schemes that fail. Currently there's little in the way of punishment to deter avoiders

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Replying to chatman:
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By ArronfHarrison
19th Aug 2013 10:46

HMRC could not possibly take a 'more robust' approach to tax avoidance than it does currently.  No further powers are needed, 'training' is not deficit for these cases and the legal costs for 'failed' schemes are sufficiently punitive for what is a civil dispute. 

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By shaka198
19th Aug 2013 11:20

Appeal SDLT

This needs to be appealed to the highest possible level to ensure the legal decision is based on the correct interpretation of current law, the numbers involved should ensure this is cost effective and happens shortly.

If HMRC does not like this then they should petition for a law change rather than rely on poor Court decisions.

 

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By rochabrava
19th Aug 2013 11:27

'Taxpayers' money'

No money belongs to the taxpayer, ie the Treasury - it belongs to person or company which earns it.  The Treasury confiscates some of it under tax legislation, but it is not rightfully theirs in the first place.  All money should be adjudged as belonging to the owner until proved otherwise.

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By Septimus
19th Aug 2013 12:23

Pay the tax !

Here Here! KenKLM

 

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Replying to SNOOPDOG:
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By chEEK
19th Aug 2013 13:07

Where? Where?

Septimus wrote:

Here Here! KenKLM

I assume you mean "Hear! Hear!"?

Unless you were calling your dog of course.

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By The Rogue
19th Aug 2013 22:04

Hear hear

Actually it comes from when visiting speakers went down well and people would call out "we agree with you here" which was shortened to "here here".  The roots have been lost in the mists of time and the expression is more commonly spelt "hear hear" which is technically not correct.

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Replying to andy.partridge:
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By chEEK
20th Aug 2013 17:27

Nonsense

The Rogue wrote:

Actually it comes from when visiting speakers went down well and people would call out "we agree with you here" which was shortened to "here here".  The roots have been lost in the mists of time and the expression is more commonly spelt "hear hear" which is technically not correct.

Sorry, but you're making it up as you go along. A sad debating tactic. And you're not making it up very well - a more unlikely story would be hard to come by.

 

Read the origins in Wikipedia here:   http://en.wikipedia.org/wiki/Hear,_hear

 

First sentence is particularly enlightening:

"Hear, hear is an expression used as a short, repeated form of hear him, hear him. It represents a listener's agreement with the point being made by a speaker. In recent usage it has often been misconstrued to be the homophonic phrase here, here, although this is incorrect.[1]"

 

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Replying to andy.partridge:
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By rbw
21st Aug 2013 09:16

You may well think so......
...but the OED agrees with the explanation given by the House authorities too: " hear, hear! n. (formerly hear- him), a cheer." and has as its first quotation one from 1727 with that spelling/usage

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Replying to Mr Hankey:
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By chEEK
21st Aug 2013 13:10

I think you're agreeing with me?

rbw wrote:
...but the OED agrees with the explanation given by the House authorities too: " hear, hear! n. (formerly hear- him), a cheer." and has as its first quotation one from 1727 with that spelling/usage

Reading the above, I'm not 100% sure if your intention is to agree or disagree with what I said. The words quoted clearly show that the word "hear" is correct (the word "here" is never used at all in what you quoted). It simply says that "Hear him!" (used as a cheer) became shortened to "Hear!", which is exactly what I said.

If your intention was to support what I said, then... thanks for that. I'm just confused by the fact that you started with the words in the title: "You may think so... but" which suggest that (you think) you're disagreeing with my post just above yours.

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Replying to jowest31:
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By rbw
22nd Aug 2013 13:30

I agree! I agree!

chEEK wrote:

If your intention was to support what I said, then... thanks for that. I'm just confused by the fact that you started with the words in the title: "You may think so... but" which suggest that (you think) you're disagreeing with my post just above yours.

 

I (thought I) was replying to "The Rogue" but it seems Accounting Web does not "thread" replies so it appeared later.  We are indeed of like mind.  Indeed, I must apologise for posting before reading your response (which made mine otiose).

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By andrew.hyde
20th Aug 2013 09:13

#rochabrava

Stirring stuff.  I can't argue with you except to say that we will all need to

have some buckets of water handy in case the house catches firebuy a gun to protect ourselves and settle disputes with neighbourstrain as a doctor in case our nearest and dearest get sickbuy a tractor to get around, as there will be no tarmac roadskeep a begging bowl handy in case we lose our jobsdig our own landfill site in the back garden for waste[and so on]

Brave new world.

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Replying to jowest31:
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By rochabrava
21st Aug 2013 13:12

I was not arguing for no taxation, but that the presumption should be that all money belongs to the earner/ owner, not the government.  Then it should be decided the amount needed for essential  government spend, and who should contribute.  It is the phrase 'taxpayers' money', meaning 'government money' I object to.  It isn't; they have to take it.

 

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The Business Growth Secret
By anndartnall
20th Aug 2013 13:18

Where does evasion even start?

My view is that all offsets against gross income are part of the same "wedge" to avoid tax. Consider the business that produces widgets, the first offset is the purchase price of materials for those sold, plus the labour & employer's NI. Would anyone not think these production costs are not valid? Is there anything immoral in claiming these costs against tax? No. What about overheads? I say no, and so does the tax legislation. Now we come to the nub - Tax Evasion is LEGAL and Tax Avoidance is ILLEGAL, but it's a division down the wedge. Any reasonable speed down the motorway to 70 mph is legal (some exceptions) but 71 mph is not. In practice you won't get done for speeding at 71 mph because of imprecision in measurement of your actual speed display in your car. If government think that loopholes that they have generated have been exploited unfairly, then they should plug the holes with better legislation and take the whole thing as a learning experience, doing better next time! 

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Replying to lionofludesch:
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By cmp1951
20th Aug 2013 18:43

Is that the correct way round? Always thought evasion to be illegal, not avoidance.

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Replying to chatman:
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By rochabrava
21st Aug 2013 13:19

Evasion/ Avoidance

Yes, cmp1951, you are right.  Evasion =illegal, Avoidance = legal.  The government is trying to make avoidance illegal, but deciding not to move house because stamp duty is too high is avoidance - how can that be illegal?!

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By cplww
20th Aug 2013 16:00

SDLT avoidance

One can't blame either side for trying it on.

The real responsibility for this current skirmish in the ongoing war between the Taxed & Taxers lies with the Legislature and Civil Servants for ever drafting & passing shoddy & not-properly-thought-out laws.

If the wizz kids from top universities recruited by the Treasury & other departments involved in the wording of the finance acts etc.are unable to draft water-tight laws, they should be shown how its done by the best commercial tax advisers.

Governments have enough special advisers these days: They should be paying the right rates to secure their services  with penalties for every loophole they miss.

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Replying to Jennifer Adams:
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By rbw
22nd Aug 2013 14:27

Be careful what you ask for, you may get it

cplww wrote:

If the wizz kids from top universities recruited by the Treasury & other departments involved in the wording of the finance acts etc.are unable to draft water-tight laws, they should be shown how its done by the best commercial tax advisers.

 

First, you don't really think Treasury people dirty their hands with the details of legislation, do you?  The Treasury took policy from the IR but left such sordid details to HMRC.

Second, do you think HMRC  attracts large tranches of the best people these days? After the way successive governments have denigrated the civil service - and restricted pay so that local government, the NHS etc offer better prospects in the public sector, without even thinking of the lure of the private sector.

Third, do practitioners really want even longer statutes and even greater complexity in order to pin down every possible combination of circumstances? 

Practitioners might bo better to ask why the courts keep saying they pursue a purposive approach to legislation but then swing one way and the other on what they means when it comes to tax avoidance.  I accept the courts have shifted in the past 100 years but it's hard to know just where they'll go next.  Remember Fitzwilliam and then McGuckian

 

But then I've always felt that most practitioners don't really want simplicity so much as certainty - and I can't blame them given the cost of liability insurance.

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By BKD
20th Aug 2013 18:45

FWIW

I agree with the CA decision - not because the taxpayers deserved to lose (which in my opinion they did) but because I interpret the legislation in exactly the same way.

SDLT "advisers" are bound to consider the decision a poor one - because much of their "advice" tends to revolve around avoiding SDLT.

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By andrew.hyde
21st Aug 2013 16:02

#rochabrava

Sorry, didn't mean to jump down your throat there. 

(But for the final word on whose money it is, you probably need look no further than Matthew 22: 20-21.)

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By Septimus
22nd Aug 2013 14:47

Must be wrong -

Both the OED and that Wiki thing said so -

Swells with pride!

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The Business Growth Secret
By anndartnall
23rd Aug 2013 22:00

Avoidance = Legal & Evasion = Illegal

D'you know, I read my posting about three times before posting about the "wedge" & still didn't spot I'd put evasion & avoidance round the wrong way - perhaps this has a lot to do with the way the government are trying to persuade us that they are equally reprehensible! It also demonstrates an individual not seeing the wood for the trees in their own output - someone else has said  that government should use more independent advisors to assess legislation before it is passed & I can only agree with that.

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By mikewhit
09th Sep 2013 09:12

Thresholds

I think SDLT would have fewer enemies if the rate at each threshold was only payable on the balance above the threshold rather than the full sum.

Or they could combine a "background rate" on the full sum with a tiered rate payable on balance above each level.

Might also remove some house-pricing anomalies.

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