Court rejects bid to block stamp duty avoidance crackdown

The High Court has thrown out an attempt to challenge legislation introduced to tackle Stamp Duty Land Tax (SDLT) avoidance.

Retrospective legislation was announced in June 2013 to halt the Blackfriars avoidance scheme, which abused the SDLT “transfer of rights” rules to avoid paying SDLT on UK property purchases.

In court, the claimants sought to challenge the retrospective legislation by judicial review.  The High Court refused permission to bring the judicial review, backing HM Revenue and Customs’ (HMRC) and HM Treasury’s argument that “Parliament was entitled to decide that this was a case in which there was justification for making the legislation retrospective”. High Court Judge Mrs Justice Andrews DBE also concluded that “anyone in the claimants’ position who entered into the Blackfriars scheme did so at their own risk”.

The Blackfriars scheme was a variant of one closed down as part of a wider crackdown on SDLT avoidance introduced in the 2012 and 2013 Finance Acts. Overall, the measures introduced to block abuse of the transfer of rights rules are expected to result in additional SDLT of over £160 million being collected for the public purse between 2013 and 2018.

Jim Harra, Director General, Business Tax, HMRC, said:

“Our commitment to stop this kind of Stamp Duty Land Tax abuse was made clear with the warning given by the Chancellor in Budget 2012 and the introduction of retrospective legislation to tackle the problem in the Finance Act 2013.

“Because of that, it should have been obvious to both promoters and users of this scheme that it could be subject to retrospective action. Our approach to tackling the scheme has now been backed by the courts.”

Notes to editors

1.  The High Court decision can be read at http://www.bailii.org/ew/cases/EWHC/Admin/2014/1848.html

2.  The scheme involved an onward sale – known as a transfer of rights or subsale – which is not to be completed for a number of years. The intended result of the arrangement was that the immediate purchaser would be left in possession of the property but would bear no SDLT liability, while the onward sale was for a low value, which attracted very little or no SDLT. 

3.  Further information on how retrospective legislation is being used to tackle SDLT avoidance can be found at http://www.hmrc.gov.uk/budget-updates/march2013/tiin.pdf

4.  Follow HMRC on Twitter @HMRCgovuk

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