New tax avoidance schemes are emerging in the wake of the Stamp Duty 3% surcharge on the purchase of second homes that came into force on April 1.
Similar schemes were popular a few years ago, but had largely disappeared as HMRC successfully challenged them and closed the loopholes, says tax expert Karen Clark of RMS.
She warns that most of those who participated in such schemes have had to pay the full SDLT liability, plus interest on late payment, and penalties in some cases – all on top of the fees paid to the promoter of the scheme.
Clark says a simple Google search reveals a handful of companies that, once again, offer structures which claim to save Stamp Duty on property purchases for an upfront fee, “although actual details of their schemes are sketchy”.
She adds: “Almost certainly, such schemes will be challenged by HMRC.”
Clark said that the sheer complexity of the new Stamp Duty rules for second and subsequent properties means that many conveyancers do not understand them sufficiently.
Her firm has seen cases of purchasers potentially paying too much Stamp Duty as the conveyancer errs on the side of caution, or being told to take advice elsewhere.
This may push the purchaser to seek ‘advice’ from one of the scheme promoter companies rather than from a more conventional tax adviser or lawyer who understands the new rules.
Clark also warns of traps for the unwary – in particular married couples where each owns or acquires a property, but are treated as one ‘unit’.
Other problems may arise for parents who already own their home and who may wish to help their child buy their first home. If they acquire an interest in the property, the higher rate of Stamp Duty will apply.