By Philippa Rudd, a principal at Cozens-Hardy solicitors in Norwich
I am buying a large property and if we do not manage to complete the purchase until after 6th April this year, I will have to pay stamp duty land tax (‘SDLT’) at 5% of the price, as the sale price is just over £1m. I have read about schemes to reduce or avoid this tax altogether but my solicitor says that such schemes do not work. Can you help please, as otherwise my tax bill will be about £50,000!
There has been an increase in demand for SDLT avoidance schemes, as the SDLT on properties valued at over £1 million rises in April to 5%, from the current 4% rate. The subject of SDLT avoidance schemes is a controversial area of law because the intermediaries offering these schemes are generally unwilling to give details to the public. Normally, a significant percentage of the apparent saving is shared with the intermediary as their fee. The processes vary but can involve the use of a limited company and the issue of shares. The effectiveness of such schemes will almost certainly be challenged by the government at some stage, hence the reason why this secretive and potentially lucrative area of the market is not widely publicised.
But surely I have nothing to lose and I could save a small fortune. I am annoyed that my solicitor is not being more co operative.
If you are having a mortgage, your lender will require your solicitor to ensure that all SDLT is duly paid. Other details of the scheme are likely to be inconsistent with your solicitor’s obligations to the mortgage lender. Further, the schemes rely on an intermediary;
HM Revenue & Customs could come back and demand the tax from you in full, together with interest and a fine for late payment and by then the intermediary may have disappeared or be otherwise unable to pay back the share of the money they had taken. You would consequently be considerably out of pocket. Your solicitor is also governed by an ethical code and he or she would not permit you to take part in a scheme that may involve misrepresenting the true transaction to the tax authorities.
Philippa Rudd is on 01603 625231.