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image of rafters | accountingweb | Couple used tax avoidance scheme to buy £1m house
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Tax scheme to buy £1m home fails to raise the roof

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A couple failed to avoid stamp duty land tax when purchasing a house for £955,000 because the tax avoidance scheme they used floundered for two reasons.

2nd Apr 2024
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Stamp duty (SD) on the sale of properties was a tax “notorious for the ease with which it could be avoided”. Parliament’s intention on introducing its replacement – stamp duty land tax (SDLT) – was “to ensure all purchasers of property pay their fair share of tax”.

Nonetheless, schemes for avoiding SDLT were never completely eliminated, as illustrated in the case of Michael and Bridget Brown [2024] EWCA Civ 92, which has now been decided by the court of appeal.

The Browns wished to acquire a property in Cobham, Surrey for £955,000. They were advised by Premier Strategies Ltd of a scheme which would, Premier assured them, avoid SDLT of £38,200. 

On 2 July 2007, the Browns incorporated Earlswood as an unlimited company, each subscribing for 47,751 £1 shares at par, paying £95,502 in total. 

On 9 July 2007, Earlswood contracted with an unconnected third party to purchase the property for £955,000 and paid a deposit of £95,000. 

On 8 August 2007, Earlswood issued a further 864,500 £1 shares at par (bringing the total shares in issue to 960,002), in return for promissory notes totalling £864,500 from the Browns, which were expressed to be payable on 15 August 2007.

On 15 August 2007 a number of events took place simultaneously. 

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Replies (34)

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By Paul Crowley
02nd Apr 2024 18:20

The more schemes that are killed of the better. Tax schemes usually are only affordable by the wealthy, and devised, marketed, advised on by, and sold by the wealthy.
People on Basic rate tax are effectively subsidising the the most greedy of the wealthy. Even PII is likely pay out because an advisor failed to take advantage of a tax scheme that might work.
HMRC needs extra resources to kill these scams off quicker. Scams used by public figures should be the highest priority.

Thanks (27)
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By FactChecker
02nd Apr 2024 21:02

What I don't understand (not being a Lawyer) is who is funding the fees of these 'long-shots' (FTT to UT to CoA is not inexpensive)?

AFAIK in at least some courts (libel?) the source of funding not only has to be declared but placed in 'open court' for public consumption. If so, what would that reveal in these kinds of cases?

It's a farce - and not only are the taxpayer herd funding every attempt to weasel out of paying tax by the wealthy, as Paul points out, but they are paying for this pointless consumption of legal fees and HMRC resources.

Thanks (12)
Replying to FactChecker:
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By Justin Bryant
03rd Apr 2024 09:08

Counsel and I represented the taxpayers pro bono.

The decision was very disappointing, especially as this other case shows how Hurstwood Properties must be treated with caution and is not a Ramsay tax avoidance panacea for HMRC re artificial/non-commercial steps: https://caselaw.nationalarchives.gov.uk/ukut/tcc/2022/185
Ironically Lord Justice Lewison was the judge quoted at para 86 here with approval!
http://taxandchancery_ut.decisions.tribunals.gov.uk/Documents/decisions/...
I think this recent CoA case is quite helpful re Ramsay, where the actual contracts were respected and no other (tax avoidance) contracts were substituted/implied (as the judges seemed to do in Brown) and this bit from the UT was cited with apparent approval: https://www.bailii.org/ew/cases/EWCA/Civ/2023/1481.html
66. The UT then observed, at [78], that there are limits to the application of the Ramsay doctrine, citing the dictum of Patten LJ in Brain Disorders Research Limited Partnership v HMRC [2018] EWCA Civ 2348, [2018] STC 2382, at [32]:
"Although the Ramsay approach to construction has undoubtedly involved the courts in looking at the commercial realities of the transaction and ignoring financial components of a scheme which are circular or have no purpose other than to produce a tax loss in order to identify whether and, if so, which parts of the transaction engage the relevant tax provisions, it does not enable the courts to fix the taxpayer with a contract which under the scheme it does not have. The actual transactions remain the same."
So HMRC's Ramsay challenge there failed, despite it obviously being a tax avoidance scheme.
See also: https://www.patrickcannon.net/forums/topic/when-will-the-courts-take-a-p...

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Replying to Justin Bryant:
By ireallyshouldknowthisbut
03rd Apr 2024 10:30

As my kids would say you got pwnd.

I have 3 clients who did these schemes with premier strategies in this time period. All 3 ended up paing the tax, and the fees.

And too right, 100% contrived nonsense with no commercial basis. I told the clients at the time they were risky.......

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Replying to ireallyshouldknowthisbut:
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By Justin Bryant
03rd Apr 2024 10:37

Not sure what you mean. There was no downside risk apart from the fees.

This SDLT scheme was not exclusive to Premier Strategies and many eminent tax barristers did a +ve opinion on this (it worked in 90%+ of cases where there was no valid HMRC enquiry/DA - that you don't read about of course) and it was clearly not a hopeless case given it went to CoA (i.e. it was not merely my brilliant tax litigation skills that enabled that).

And look at this other recent dodgy looking CoA decision: https://www.bbc.co.uk/news/business-68716629

Thanks (3)
Replying to Justin Bryant:
By Ruddles
03rd Apr 2024 11:23

Justin Bryant wrote:
it was clearly not a hopeless case ... my brilliant tax litigation skills

Lost at FTT
Lost at UTT
Lost at CoA

Hmmm....

Thanks (6)
Replying to Ruddles:
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By Justin Bryant
03rd Apr 2024 11:29

Well, you missed the fact that I won permission to appeal late at the FTT and that HMRC win 19/20 tax avoidance cases (and it's no mean feat to get to CoA) and pray tell us of your success(es) thereto if you think you're so brilliant.

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Replying to Justin Bryant:
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By dwgw
03rd Apr 2024 12:26

Oh dear. Time to come in from the playground.

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Replying to Ruddles:
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By Justin Bryant
03rd Apr 2024 12:56

You have rather betrayed your extreme if not total ignorance there. You don't get permission to appeal for hopeless cases.

Also, you obviously should not judge a tax lawyer's (tax avoidance scheme) litigation ability against HMRC by looking purely at their wins when HMRC win 19/20 tax avoidance cases. That's just dumb (and a rubbish lawyer could always win purely on a bizarre, unexpected technicality etc. regardless of their ability).

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Replying to Justin Bryant:
Stepurhan
By stepurhan
03rd Apr 2024 12:49

Winning permission to appeal late at the FTT and then get to the CoA does not seem like something to boast about in the circumstances. Given you lost at every level, does this not mean you managed to incur higher legal costs for your clients without achieving any benefit for them?

HMRC winning 19 out of 20 tax avoidance cases is a meaningless statistic on its own. If those 19 cases all involve contrived schemes like this one appears to be, then they SHOULD be winning those cases. If you think the courts are biased in HMRC's favour, please say so and cite other examples.

Other people's successes, or otherwise, are also irrelevant. You are the one that has invited judgement on your own abilities as applied in this case. It is not a competition.

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Replying to Justin Bryant:
By Ruddles
04th Apr 2024 15:09

What I may think of my own ability is irrelevant - I was referring only to the success rate of this particular case.

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Replying to Justin Bryant:
Donald MacKenzie
By Donald MacKenzie
03rd Apr 2024 14:10

You wrote "it worked in 90%+ of cases where there was no valid HMRC enquiry"

Relying on getting away with a dodgy scheme because HMRC fails to spot it is an interesting gamble. But one that costs other taxpayers money to fill to tax gap.

Thanks (12)
Replying to Donald MacKenzie:
By Ruddles
03rd Apr 2024 14:53

It's the sheer hypocrisy of some that leaves a sour taste.

Thanks (4)
Replying to Ruddles:
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By Justin Bryant
03rd Apr 2024 14:54

You mean DN?

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Replying to Justin Bryant:
By Ruddles
03rd Apr 2024 15:05

Justin Bryant wrote:

You mean DN?


No

Although, now that you mention it ...

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Replying to Ruddles:
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By Justin Bryant
03rd Apr 2024 15:23

Well, assuming you meant me, cite me an instance when I have been a hypocrite re tax avoidance schemes. (I'm not like DN after all.)

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Replying to Donald MacKenzie:
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By Justin Bryant
03rd Apr 2024 14:53

No sh*t.

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Replying to Justin Bryant:
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By Paul Crowley
03rd Apr 2024 16:24

What you are saying is that HMRC do not have the resources to monitor all users of these schemes and that 90% get away with it.

The same is probably true of self assessments that are a complete work of fiction.

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Replying to Paul Crowley:
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By Justin Bryant
03rd Apr 2024 17:28

But unlike tax avoidance schemes, self-assessments that are a complete work of fiction are tax fraud.

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Replying to Justin Bryant:
Donald MacKenzie
By Donald MacKenzie
03rd Apr 2024 21:36

Schemes marketed as "tax avoidance" but which are then classed as unacceptable by the courts are not "avoidance" but "evasion".
Just because HMRC does not spot some of them does not make them legal "avoidance".

Thanks (3)
Replying to Justin Bryant:
Donald MacKenzie
By Donald MacKenzie
04th Apr 2024 11:32

Which part of my comment do you disagree with?
Do you claim that schemes classed as unacceptable by the courts are still legal "avoidance" not illegal "evasion"?
Maybe it is not me that is "clueless".

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Replying to Donald MacKenzie:
By Ruddles
04th Apr 2024 14:46

At most, I would say that (the implementation of) such schemes have been proved to be unlawful, which is not necessarily the same as illegal.

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By OrmeGoat
03rd Apr 2024 09:42

How much was the fee for this "advice"? And I won't insult anybody by asking if it was refundable if the advice was useless.

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Replying to OrmeGoat:
By ireallyshouldknowthisbut
03rd Apr 2024 19:49

Typically they would be 10-30% of the tax 'saved'. Its non refundable.

Plus of course all the fees for the appeal etc etc etc

There is lots of money to be made in promoting hopeless schemes which dont work.

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By rememberscarborough
03rd Apr 2024 09:43

Interesting that the judge was getting snippy about who should decide what is law and what isn’t when the whole reason the case was bought in the first place was because the tax law isn’t fit for purpose. Mind you, if it was, maybe his honour and many of those in his industry wouldn’t have a job so maybe it’s in their best interests to have a system like we have with all its idiotic flaws….

Thanks (6)
Donald MacKenzie
By Donald MacKenzie
03rd Apr 2024 09:49

"All this was done under a pre-ordained scheme with no purpose other than the avoidance of SDLT"

Anti-avoidance rules are designed to stop chancers avoiding tax by contrived schemes. This is an egregious example and I hope the result will discourage those who push such dodgy schemes.

Thanks (12)
Replying to Donald MacKenzie:
By Nick Graves
03rd Apr 2024 15:41

Yeah, that's what seems so egregious about it.

If the company had developed the property, declared a small profit and then transferred it to the shareholders via the wangle tangle, there [i]might[/i] have been a commercial reason for doing it like that.

But as it stands, it does seem like 'avoid ££££s in SDLT by swallowing the house keys & wail until they fall out your [***]'.

I dislike the GAAR but can see why it needs to exist, sadly.

Thanks (5)
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By Springfield
03rd Apr 2024 10:35

I have no desire to unpick the technicalities of this case, but i would say that the most relevant point in my understanding of it is the date of the original transaction - July 2007. This was in those days of innocence before the financial crash and subsequent tax-payer funder bank bail-outs. When self certification mortgages were all the rage and every man and his dog wanted to be their own property king, on a one-way bet to riches. Indeed, this was before, in his own words, Gordon Brown saved the world.

In the years that have followed societal attitudes have changed radically. The use of tax-payer's money followed by colossal government debt to pay for everything from bank bail-outs to covid support schemes mean that most people are now far more sensitive to the issue of artificial tax avoidance and the fact that, for each couple like those in this case that seek to escape tax, the rest of us have to pay more.

So. are there still schemes like this being promoted for something as basic, routine and common as a domestic house sale or purchase? I suspect not, and probably because the public now have a much more responsible view of what's acceptable.

The person who in 2007 might have said at their dinner party - "Hey, guess what? We saved 30 grand on stamp duty buying this £1m house with a clever scheme," is probably as rare these days as the person who says "I'll just have a quick double brandy before I drive home."

Thanks (10)
Replying to Springfield:
Pile of Stones
By Beach Accountancy
03rd Apr 2024 21:56

Maybe we should be grateful that this whole saga only lasted 26.5 years

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Replying to Beach Accountancy:
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By FactChecker
03rd Apr 2024 23:02

Er, yours for a knock-down bargain ... only 16.5 yrs!

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Replying to FactChecker:
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By Justin Bryant
04th Apr 2024 08:54

Yes; and there I was thinking the comments here couldn't get any dumber!

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By Mr J Andrews
04th Apr 2024 10:29

Is this the same Premier Strategies - tax division of collapsed firm RSM Tenon ? I seem to recall all of its tax schemes were challenged by HMRC.
Whatever the views of A.W. posts , a little more nous by legislators would put an end to so called 'interpretation'.

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By AndrewV12
04th Apr 2024 10:30

Reading the above it just shows you how complicated it is to get around taxes, and the nonsense schemes devised to get around the rules.

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By petestar1969
04th Apr 2024 15:43

I used to work for a firm of accountants who thought EBT's peddled by Qubic to avoid corporation tax were a good idea, but even they weren't daft enough to get involved with this kind of nonsense.

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