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SDLT anti-avoidance provisions survive High Court challenge

17 June 2014

Retrospective legislation to tackle a stamp duty avoidance scheme has survived an attempted challenge in the High Court in London.

The measures, contained in s 194(1)(a) and (2) of the Finance Act 2013, were announced in June 2013 to halt the "Blackfriars" avoidance scheme, which was a variant of one closed down as part of a wider crackdown on SDLT avoidance introduced in the 2012 and 2013 Finance Acts.

It abused the SDLT “transfer of rights” rules to avoid paying SDLT on UK property purchases, by introducing an onward sale – known as a transfer of rights or subsale – which was 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 little or no SDLT.

Mrs Justice Andrews in the High Court refused permission to St Matthews (West) Ltd to challenge the provisions by judicial review, upholding HM Revenue & 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”. She commented: “Anyone in the claimants’ position who entered into the Blackfriars scheme did so at their own risk.”

Jim Harra, director general of business tax at 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.”

Click here to view the court's decision.

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