Our commercial SDLT planning remains effective and available.

HMRC recently challenged a Stamp Duty Land Tax (SDLT) avoidance scheme in the First-tier Tribunal (Tax Chamber) and won. The decision in this case – Vardy Properties & Vardy Properties (Teesside) Limited [2012] UKFTT 564 (TC) – is not being appealed and is final.

Read the decision of the First-tier Tribunal on the BAILII website (Opens new window)

The Vardy scheme tried to avoid SDLT by purchasing a property through a UK unlimited company. Funded by its shareholders specifically for the transaction, the unlimited company acquired the property, then immediately transferred it to its shareholders as a dividend. The scheme claimed that the purchase by the unlimited company could be ignored by the SDLT rules, and that the shareholder was not liable to SDLT as it had not paid anything for the property.

The tribunal found that the unlimited company had not followed company law requirements when declaring the dividend because the dividend had not been declared by reference to any accounts. As a result, the dividend was unlawful and the purchase by the company of the property could not be ignored under the SDLT rules, as claimed. The unlimited company was therefore liable for the tax that the Vardy group had sought to avoid.

The tribunal said that even if the dividend had been lawful, the shareholder would have been liable to SDLT as the end purchaser of the property, because it had provided consideration for the purchase indirectly by paying for the shares in the company.

This transaction took place before anti-avoidance legislation was introduced on 6 December 2006.