Can You Insure Stamp Duty Mitigation Schemes?

HRMC is certainly talking a good game - it says it is going to strongly challenge any deficits - or what it sees as deficits - in SDLT repayments. In reaction to decreasing tax income, HM Revenue and Customs (HMRC) are using a more confrontational and competitive strategy to fighting recognised tax avoidance.

How is HMRC currently approaching recognised tax avoidance?

HMRC is currently interested in discovering recognised tax avoidance having declared tax consultant jakarta, late in 2011, that it would be utilizing the Land Registry's computer system to identify dealings where HMRC considered that inadequate SDLT had been paid. Supposedly, the HMRC has uncovered potential SDLT avoidance transactions and has released disclosure letters to purchasers necessitating the individual to pay the "unpaid" tax together with attention within a 30 day interval.

How might this impact you?

You may be affected if you have used a planning structure or scheme which was developed to decrease the SDLT due on purchasing UK land or property during the last four years. In many situations HMRC have already started enquiring into such plans so you may already know about this. However, in some circumstances where the enquiry window has already shut (usually nine months 30 days after completion), HMRC are now requesting disclosures as standard procedure.

What to do if you get an enquiry or a disclosure evaluation?

Firstly, there's nothing to panic about. It's just standard HMRC procedure and is designed to drive fear into the recipient. And guess what - it works, and it works well! The first thing to do is call the tax planning provider you used and ask them to deal with the correspondence. Normally this would have been included in your fee. Good providers will have given you an insurance backed guarantee, but even if you don't have one, they should normally be able to help you out. Again, most providers off a full fee refund in the worst case that you do end up having to pay it. However, they won't pay it unless you've handed them the correspondence to deal with professionally, and certainly not if you just cough up the readies to HMRC without letting them know!

Secondly, don't delay. There's a 30 day response window, just get it straight out of the door on day 1.

Thirdly, engage logic over emotion. HMRC are just trying to scare you into paying. In the case of a disclosure request outside the 9 month 30 day enquiry window, what is there to disclose, when all information has already been disclosed?! It's speculative on behalf of the HMRC to say the least. Most disclosure requests get replied to in the fashion of "Thank you for your disclosure request. As you know, this is a fully disclosed scheme under DOTAS, and furthermore, all relevant points were disclosed under the SDLT1 form submitted at the time. Please let us know exactly what else you require, as we aren't aware of anything else that needs disclosing. Yours sincerely blah blah"

Fourthly, the HMRC have only taken one case to the First Tier Tax Tribunal since the Finance Act 2003 (and with it, SDLT) was introduced. They lost. This was against DV3 in 2011.

Finally, once the professionals are on board, you can sleep easy. It's not your problem any more, at least in a day to day sense. Rest easy that a) what you've done is completely legal, b) you have a fee refund so in the worst scenario you will only need to pay back the SDLT you would have had to pay anyway c) you are likely to have insurance in place to cover additional professional fees if required.

In summary, when deciding on whether or not to pursue SDLT avoidance, bear the following in mind:

- Yes, it is possible to insure SDLT planning. Always find out if this is the case and a bona fide 3rd party insurer is involved.

- Don't get scared by HMRC's bullying tactics. Central Government were involved in the largest SDLT avoidance transaction on record (Chelsea Barracks) saving Candy and Candy nearly £50m in Stamp Duty. But that's another story.

- It's not your fault that the legislation was poorly worded and you're taking advantage of this. The Labour Party in 2006 bought their HQ using SDLT avoidance! What's good for the goose...

- The final killer line the HMRC enjoy using is the threat of introducing retrospective legislation. It's just not going to happen. Just look at the two previous points. There's also the bigger question of whether or not introducing retrospective legislation is actually legal itself.