Buyers have had to pay 100 per cent of the original tax due plus interest
A growing number of landlords seeking to avoid paying the recently introduced 3% stamp duty surcharge are reportedly being lured in to risky tax schemes that could leave them thousands of pounds out of pocket.
There has been a rise in the volume of firms selling ‘tax solutions’ claiming to be able to use loopholes in the law, backed up by high-profile legal advice, to legally mitigate stamp duty owed by buy-to-let investors in England, Wales and Northern Ireland when purchasing a property in return for an upfront fee, according to a Telegraph investigation.
David Hannah, a consultant at Cornerstone Tax, a conveyance firm which claims to offer legitimate “tax planning” services to reduce people’s stamp duty bill, told the newspaper that the demand from investors concerned about stamp duty had become a “tsumani” following the introduction of the 3% stamp duty surcharge.
He said: “My team has gone from doing one or two of these cases to doing 15 or 20 a day.”
However, HMRC has warned that such schemes generally do not work and are classed as tax avoidance, stating that people found to be partaking in them may be forced to pay 100% of the original tax due plus interest, leaving them significantly worse off.
An HMRC spokesman said: “These kinds of schemes don’t work. We have investigated thousands of cases since 2013, bringing in over £200m in SDLT. These individuals have had to pay 100 per cent of the original tax due plus interest.
“They will be much worse off than if they had just paid the right tax at the right time, especially where they have paid fees to the promoter of the avoidance scheme which are not refundable.”