Legal News
HMRC Targets Loophole in Stamp Duty Law (31 October 2011)
Date: 31/10/2011
HM Revenue and Customs (HMRC) are actively pursuing homebuyers who have avoided paying tax on their property, following the increasing number of ‘mitigation’ schemes found online. Tax avoidance costs the Government millions of pounds each year. Homebuyers are required by law to meet the cost of stamp duty land tax. This amounts to between one and five per cent of the total value of the property purchased. However, buyers are only required to pay tax when the property that they purchase is of a value of £125,000 or greater. For a small fee, websites are offering to provide prospective homebuyers with tax avoidance tips. Online calculators aid prospective homebuyers in calculating their tax avoidance savings. The companies who offer these schemes claim that customers are attracted due to the harsh economic times and the requirement to provide mortgage lenders with greater deposits on their purchases.
Stuart Cam, who manages half a dozen tax planner referral websites, claimed that around 500 people per month had requested a referral to a tax planner. Mr. Cam said that two popular methods of tax avoidance were in existence: purchasing fixtures and fittings separately and consequently reducing the cost of the property to below £125,000, and creating a corporation through which to purchase the property. Tax planners believe that they their work legally exploits current tax law loopholes. HMRC is currently investigating the tax affairs of 1,200 people it believes to have underpaid tax and is set to challenge these schemes through the courts.
Duncan Lewis’ conveyancing solicitors can advise clients on the tax laws relating to their property purchases.