The decision brings the amount of taxpayers’ money the department has protected in the last year to almost £400m through successfully challenging a number of SDLT tax avoidance schemes.
In the Court of Appeal case, DV3 Regent Street Ltd set up an artificial scheme which involved the purchase of the former Dickins & Jones building in Regent Street, London. DV3 set up a limited partnership based in the British Virgin Islands with three connected companies and a unit trust. It had a 98% interest in the partnership.
As soon as DV3 acquired the head leasehold interest in the D&J building, it transferred it to the partnership. It then argued that because DV3 and the people connected to it were the partners in the partnership, under the SDLT partnership rules the property should be treated as transferred for nil consideration meaning that no SDLT was payable, rather than the £2.6m SDLT due on the full purchase price.
The Upper Tribunal found that the scheme worked and HMRC appealed to the Court of Appeal.
Allowing the appeal, the court said that, rather than the simple and elegant scheme to avoid SDLT, all it had actually achieved was to shift the obligation to pay the tax from DV3 to its partnership.
HMRC is delighted with the win, not least because there are 87 follower cases which the judgment will affect. “This case shows that HMRC will challenge the designers of tax avoidance schemes and those who use them, taking them to the highest court in the land if necessary,” said Treasury exchequer secretary David Gauke.
“This is another excellent win that will protect the money of hard-working taxpayers.”
Other high profile court wins that HMRC has scored against SDLT avoidance schemes since September last year include Vardy Properties (saving £170m), Edward Allchin (£7m), and Project Blue Ltd (£135m).