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Building company’s tax avoidance scheme exposed

Press Release   •  Mar 11, 2017 08:00 GMT

Building company’s tax avoidance scheme exposed

A tax tribunal has ruled against a Stamp Duty Land Tax (SDLT) avoidance scheme used by Crest Nicholson, one of the UK’s largest house builders, meaning it will have to pay the £1.3m it owes.

HM Revenue and Customs (HMRC) challenged the artificial and complex arrangements made by the FTSE 250-listed company to avoid paying SDLT on three purchases of development land near Rochester in Kent for a total of more than £32m.

The avoidance scheme tried to use the transfer of property between two sub-companies to avoid SDLT.

The First-tier Tribunal decision is likely to have an impact on more than 700 other cases, potentially protecting £65m of taxpayers’ money.

Crest Nicholson argued that HMRC didn't have a legal right to make assessments of the tax due because it was out of time to do so, and that it had not carried out its assessments properly.

The judge disagreed with these arguments and found HMRC had acted correctly throughout.

The judgment reflects HMRC’s tribunal victory in the Vardy case (2012), when it challenged a similar SDLT avoidance scheme based on complex sub-sale arrangements.

HMRC’s Director General, Customer Compliance, Jennie Granger, said:

“This decision makes it clear that setting up artificial and complex arrangements involving sub-companies to avoid paying tax doesn't work.

“It's another important success that’s protected taxpayers’ money. This win sends a clear message that tax avoidance is expensive and self-defeating.”

HMRC challenges every tax avoidance scheme it comes across and has a strong record of defeating schemes. When taxpayers choose to litigate, HMRC wins about 80% of avoidance cases heard in court, though many more scheme users choose to settle before reaching this stage by paying all the tax due.

Note to Editors

1. Crest Nicholson was established in 1963 by Bryan Skinner and is listed on the FTSE 250 index.

2. The First-tier Tribunal decision is available here

3. The First-tier Tribunal determined that a sub-sale scheme involving a reduction in capital (effected by distribution in specie of land or rights to land) engaged the provisions of Finance Act 2003, section 45, but nevertheless gave rise to a chargeable secondary contract, whose consideration was equal to the full amount of the purchase price for the land in question.

4. Follow HMRC’s Press Office on Twitter @HMRCpressoffice

5. HMRC’s Flickr channel www.flickr.com/hmrcgovuk

Issued by HM Revenue & Customs Press Office

HM Revenue & Customs (HMRC) is the UK’s tax authority.

HMRC is responsible for making sure that the money is available to fund the UK’s public services and for helping families and individuals with targeted financial support.