Further changes to the Stamp Duty Land Tax (SDLT) legislation in this year's Finance Bill have once again changed the possibilities for effective SDLT planning. In particular, ‘JPUT schemes’ are no longer available, but structures using partnerships may offer a new alternative. In considering remaining planning possibilities, obligations under the SDLT Disclosure Regime, and more generally in relation to self-assessment of SDLT, must be taken into account.

Action points

  • Review each transaction to consider any possible planning opportunities

  • Take care to preserve any potential reliefs
  • Ensure appropriate disclosures are made
  • Maintain appropriate evidence and records

SDLT Planning

In this year's Budget, unit trust ‘seeding relief’ where property could be put into a unit trust free of SDLT was abolished. The use of this relief to put property into Jersey unit trusts and then sell the trust is therefore now a thing of the past.

However, changes to the calculation of the SDLT charge on putting property into a partnership, effective from Royal Assent of the Finance Bill expected in late July appear to have opened up some new planning possibilities.

The planning structures which remain available include:

  • Partnership structures

Whilst there are SDLT charges on transfers of land into and out of partnerships, as well as on transfers of interests in land-owning partnerships, there is still considerable scope for planning using companies in partnership. The main practical issue is that, for the SDLT planning to be effective, a noncorporate (effectively an individual or trust) must also be a partner in the partnership.

  • Hive-up Scheme

Recent changes to group relief have made it very difficult to put a property into an SPV within 3 years of a sale of the SPV. This structure provides a mechanism for getting a property into an SPV prior to a sale without relying on group relief, so that the shares can be sold with 0.5% stamp duty rather than SDLT at 4%. It is suitable in relation to investment properties owned by a corporate seller and where the buyer is happy to acquire an SPV.

  • Sub-sale scheme

Planning relying on the way in which the rules on sub-sales work is a possibility in relation to expensive private houses. In a commercial context, base cost and VAT issues make this planning less attractive and it can be difficult to structure outside the SDLT rules on connected companies.

  • Prudential scheme

‘Prudential’ schemes, where land is separated from construction on a sale by a developer, remain effective under the SDLT regime. The sale of the land will attract SDLT, but consideration under the construction contract should not fall into charge provided that arrangement is suitably structured.

  • Other

SDLT planning outside specific ‘schemes’ can be very effective in delivering savings. It is always important to check whether SDLT charges can be mitigated by avoiding ‘traps’ in the legislation, or by bringing the transaction within the conditions for a suitable relief.

Disclosure

All of the schemes referred to above would require disclosure to HM Revenue & Customs (HMRC) under the SDLT Disclosure regime, which has applied since August 2005 to all arrangements for SDLT planning in the commercial sector (see our previous bulletin http://www.pinsentmasons.com/media/1645810213.pdf).

In addition, as SDLT is a self-assessment tax, each taxpayer is under an obligation to ensure that it makes correct and complete disclosure.

HM Revenue & Customs and the courts are changing their general attitude towards avoidance and what are considered to be acceptable levels of disclosure when making returns, which means a robust technical analysis must underpin any planning. In particular where a structure is perceived to be vulnerable to attack under anti-avoidance case law, all parties need to consider their disclosure obligations, not only under the disclosure regulations, but also when submitting SDLT returns.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.