On 11 April 2023, the General Anti-Abuse Advisory Panel published an anonymised opinion on a stamp duty land tax (SDLT) planning case in respect of a sale and purchase of residential property, following a referral from HMRC.
The tax planning issue before the Panel concerned steps taken by two individual purchasers who, on the advice of their tax adviser, had purchased a dwelling as tenants in common in the proportions 99:1. On the same day, the purchaser with the majority interest entered into a sub-sale of 18% of the beneficial interest in the property to the other in return for the grant of an annuity as consideration. As a consequence of these steps, it was argued that the taxable consideration for the sale and purchase of the dwelling was reduced below the threshold at which SDLT has to be paid.
This was on the basis that:
- Section 52 of the Finance Act 2003 provides that if the chargeable consideration is an annuity, it is deemed to be a one-off payment comprising of 12 years of payments; but
- Section 45 and Schedule 2A of the Finance Act 2003 apply special rules that relieve double SDLT charges for certain sub-sales.
The taxpayer effectively sought to apply these rules such that the relatively small annuity paid for the sub-sale, rather than the purchase price for the property, was the consideration to be used to calculate the SDLT due.
The Panel concluded that the arrangement was not a reasonable course of action and there is a clear policy objective to deny sub-sale relief where arrangements are designed to exploit reliefs. The Panel described the use of the annuity provisions and sub-sale relief in this manner as "contrary to its objective". The Panel also noted that annuity provisions were not intended to allow purchasers to enter into arrangements which would then eliminate SDLT.
The Panel decision is unsurprising given the contrived and unusual steps taken by the taxpayers. However, the decision provides a reminder that tax planning involving steps that are inconsistent with the principles and objectives of policy and legislation are unlikely to be viewed as acceptable planning by HMRC and the Panel if subject to a referral. This is the second Panel opinion on SDLT planning in the last year. The Panel reached the same conclusion in an opinion published in 2022 in relation to transactions involving an alternative finance agreement and lease agreement on a sale and purchase of residential property.