This is an appeal on a complex Stamp Duty Land Tax (SDLT) avoidance scheme involving annuities.
A property valued at £765,00 was purchased for a cash price of £38,250 and a promise to pay an annuity of £383 per year. The SDLT regime has special rules for annuities, broadly requiring only 12 instalments of the annuity to be taken into account in determining the purchase price. By using this rule the purchaser hoped to bring the total consideration to an amount lower than the SDLT threshold and thus avoid any SDLT being paid.
The Upper Tribunal followed the First-tier in rejecting this argument. It pointed out first that it would take 1,893 years for the payment from the annuity to add up to the total sale price (even before accounting for interest) and second that the annuity was cashed in within days of it being taken out, so that the vendors in fact received the full value of the house in cash.
It is perhaps not surprising that this scheme failed and SDLT practitioners will find much of inter-est in the close analysis of the relevant provisions. Of more general interest is the penalty aspect of the appeal. The taxpayer here was himself a stamp duty adviser and was well aware of the way that the SDLT rules operate. In the circumstances, particularly as he chose not to give evidence of his beliefs about the effectiveness of the scheme before the First-tier tribunal, the Upper Tribunal confirmed that the inaccuracies in his return were deliberate and therefore upheld the penalty which HMRC had imposed.
While there is unlikely to be much disagreement with the SDLT analysis here itself there may be some surprise that, on what is essentially a technical issue, the tribunal supported HMRC’s that the inaccuracy was deliberate.
• Andrew Hubbard is Editor-in-Chief of Taxation magazine. Each week Andrew highlights a case that caught his eye and are likely to be of particular interest to tax practitioners. For more go to www.lexisnexis.com.