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UK: HMRC updates stamp duty land tax guidance, for step transactions

UK: HMRC updates stamp duty land tax guidance

HM Revenue & Customs (HMRC) updated guidance under the section 75A anti-avoidance legislation.


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Section 75A FA2003 effectively short-cuts or re-casts land transactions in England or Northern Ireland having multiple component steps. If the recast transaction generates more stamp duty land tax than the actual transactions would, that higher amount of stamp duty land tax would be payable. Previously section 75A was understood to be an anti-avoidance provision, only to be applied when taxpayers avoided tax (deliberately or not).

Updated HMRC guidance

Because of recent court decisions, HMRC updated the guidance to remove statements that the section 75A anti-avoidance legislation will not be applied when transactions are taxed appropriately, absent section 75A. In other words, it appears HMRC will no longer accept arguments that combined step transactions that result in a reduced liability to stamp duty land tax are spared section 75A merely because the reduced liability is in line with the overall scheme of the legislation and therefore is not tax avoidance. The HMRC guidance provides that if the outcome of any sequence of transactions (presumably the outcome being the acquisition of the property) depends on one of those transaction steps, then that transaction is deemed to be a scheme transaction.

KPMG observation

The HMRC guidance does not address many of the uncertainties faced in this area (and given the difficulty with the legislation and the case law this is understandable). The guidance does give a clear indication that HMRC proposes to apply rules that must have been intended as anti-avoidance legislation, without regard to whether the transactions in question defeat the aims of the rest of the stamp duty land tax legislation or not.

It remains to be seen if HMRC will exercise discretion, given that there are many examples of transactions when the application of section 75A would give unintended results. Thus, taxpayers may remain uncertain of the stamp duty land tax costs of many transactions, even relatively straightforward ones.

Read a January 2020 report prepared by the KPMG member firm in the UK

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