UK and International Tax news
FTT Hears Mass Marketed SDLT Avoidance Case
Monday 17th March 2025
The First Tier Tribunal has recently rejected an appeal by the taxpayer in a case involving an annuity scheme used for the avoidance of SDLT.
In William David Robinson & Anor v HMRC [2025 UKFTT 55], the appeal concerned a scheme mass marketed by Cornerstone Tax, designed to reduce SDLT.
In March 2016, the appellants purchased a residential property for just under £600,000. Nil SDLT returns were submitted and HMRC opened enquiries into those returns. A closure notice was issued in October 2021 assessing the appellants to SDLT of almost £20,000. The appellants appealed the assessment.
HMRC applied to strike out the appeal on the basis that it had no reasonable prospect of success. HMRC advised the FTT that they were aware of approximately 750 transactions in which the scheme or some variant of it was used.
In April 2023, the GAAR panel issued an unfavourable ruling and Goldstone Tax, a company associated with Cornerstone and who had submitted the notice of appeal on behalf the appellants in this appeal, wrote to users of the scheme recommending that they settle. The vast majority of scheme users settled. HMRC further advised that there were only four outstanding appeals including this one in relation to the scheme.
The annuity scheme was envisaged to work as follows. P wished to purchase a dwelling from V. but before completion, P sub sells a proportion of his putative equitable interest in the property to an associated individual, P2. The consideration given by P2 is of an annuity. P then completes the contract with V.
It was Cornerstone’s view that the subsale of the equitable interest was a qualifying subsale under the relevant SDLT legislation. This meant that P could apply for an exemption from SDLT in respect of the original deal with V. P2 would be liable to SDLT on the subsale but only on the basis of the annuity which was limited to 12 annual annuity payments plus an amount equal to the value of the equitable interest as a proportion of the consideration under the original contract. As these fell within the nil rate band for SDLT, no SDLT was payable on the transaction.
The FTT held that the analysis was wholly wrong and there was no technical merit whatsoever in Cornerstone’s analysis nor in the grounds of appeal which were drafted by Goldstone. It allowed HMRC’s application and directed that the proceedings be struck out with immediate effect.
The FTT found that s.75A did apply to the scheme and SDLT of approximately £20,000 was payable. S.75A was designed to combat subsale schemes and in particular where the SDLT payable is less than the amount that would have been paid on a notional transaction between the vendor and the appellants.
If you would like more information on this decision, please contact Keith Rushen on 0207 486 2378.
Contact Us