A higher number of landlords are looking to avoid paying the additional 3% Stamp Duty surcharge by being sucked into unscrupulous tax schemes.
An investigation by the Telegraph has revealed that there has been a rise in firms selling so called ‘tax solutions’, claiming to exploit loopholes in the to legally mitigate the surcharge. These firms propose to offset the costs for buy-to-let investors in England, Wales and Northern Ireland when buying property in return for an upfront fee.
Stamp Duty cons
David Hannah, consultant at Cornerstone Tax, a conveyance firm offering legitimate tax planning services to reduce Stamp Duty, spoke exclusively to the Telegraph. Mr Hannah noted that demand from investors worried by Stamp Duty charges had turned into a, ‘tsunami’ following its inception on 1st April this year.
Hannah said, ‘my team has gone from doing one or two of these cases to doing 15 or 20 a day.’[1]
However, HMRC warned that these schemes do not generally work, classing them as tax avoidance. It notes that people taking part in them could be forced to pay 100% of the original tax plus interest, which will leave them substantially worse off.
Stamp Duty tax avoidance schemes rising
Costly
A spokesperson for HMRC noted that, ‘these kinds of schemes don’t work. We have investigated thousands of cases since 2013, bringing in over £200m in Stamp Duty Land Tax. These individuals have had to pay 100% of the original tax plus interest.’[1]
‘They will be much worse off than if they had just paid the right tax at the right time, especially where they have paid fees to the promoter of the avoidance scheme which are not refundable,’ they added. [1]
[1] https://www.landlordtoday.co.uk/breaking-news/2016/7/dodgy-tax-avoidance-schemes-could-cost-landlords-thousands