Stamp Duty Land Tax avoidance: misleading advertising (Spotlight 43)
The Advertising Standards Authority (ASA) has ruled against misleading advertising of a Stamp Duty Land Tax (SDLT) avoidance scheme by promoter, Fiducia Wealth and Tax.
HM Revenue and Customs (HMRC) complained to the ASA about misleading advertising by a tax avoidance scheme promoter, CDP Tax & Wealth Limited, which trades as Fiducia Wealth and Tax (Fiducia).
The ASA agreed with HMRC and ruled that the claims made by Fiducia are misleading and must be withdrawn.
How this scheme is claimed to work
The scheme advertised by Fiducia claims to use government approved statutory rules that are within the tax legislation and reduce SDLT bills on residential property purchases by 60%.
In practice, no SDLT is paid on the purchase and Fiducia keeps the balance of 40% as its fee.
HMRC’s understanding of the scheme is that:
- certain types of land transactions are exempt from SDLT
- one of these exemptions prevents mortgage providers incurring SDLT when they take a ‘security interest’ in a property as security for a mortgage
- Fiducia is selling a scheme which seeks to misuse this exemption through a complex series of transactions, so that no SDLT is paid
These types of arrangements fall under the meaning of ‘avoidance’ and go against the intentions of Parliament. Claims that such schemes are not disclosable under disclosure of tax avoidance schemes (DOTAS) are only correct if they don’t fall within one of the DOTAS hallmarks.
The Solicitors Regulation Authority has warned solicitors against involvement in SDLT avoidance.
The ASA Ruling
The ASA ruled that claims made by Fiducia are misleading and must be withdrawn.
The ASA has also ruled that the Fiducia website “misleads by omission” by failing to mention the many government tools and policies aimed at counteracting the avoidance they’re promoting.
This includes the General Anti-Abuse Rule (GAAR). For transactions that took place after 16 July 2013, HMRC will consider whether the GAAR may apply.
Transactions after 14 September 2016, where the GAAR applies, will be subject to a 60% GAAR penalty.
HMRC is actively pursuing a number of potential GAAR cases, and to date the GAAR Advisory Panel has consistently considered that all cases referred to them were not a reasonable course of action.
The panel’s opinions have wide-reaching impacts and reinforces the power of the GAAR in tackling abusive tax avoidance.
The Fiducia website also fails to highlight that the SDLT scheme offered is a form of tax avoidance which HMRC is likely to challenge.
What this means for promoters
The ASA ruling sets an example so other avoidance promoters can’t make the same claims about similar arrangements.
Fiducia and other promoters of similar planning arrangements must now remove these claims from their advertising or risk facing ASA sanctions for failing to comply with its rulings.
What to do if you’re using an SDLT scheme
If you’re using one of these schemes, you’ll be challenged by HMRC and will be charged interest on top of the SDLT due. You’re also likely to be charged a penalty for an inaccurate return.
For transactions after 16 November 2017, you may generally be charged a penalty because of carelessness, unless you can show us you took reasonable care.
If you’re using an SDLT avoidance scheme, you should contact HMRC to make arrangements to pay the SDLT due as soon as possible.
Find out more about how to identify tax avoidance schemes.