Landlords Warned against Stamp Duty Tax Avoidance Schemes

Landlords Warned against Stamp Duty Tax Avoidance Schemes
HMRC has warned landlords to steer clear of fraudulent schemes built around the idea of avoiding the Stamp Duty hike on second home purchases.

The Telegraph investigated a raft of companies selling 'tax avoidance' solutions using loopholes to save landlords the stamp duty charge, but HMRC says that those schemes generally do not work, and individuals taking part in them may still be forced to pay the original tax fee, plus interest, plus the cost of the tax solution. The result could leave landlords significantly out of pocket.

One company, called Fiducia Wealth, claimed to be able to save a landlord his £16,000 stamp duty fee at the cost of a £5,000 up-front fee. The cost would pay for legal expertise that would identify a loophole to exempt stamp duty charges.

However, the Telegraph questioned Fiducia Wealth and found that it was a tax avoidance product instead of a legal exoneration, and Fiducia Wealth would not confirm whether its solutions are illegal.

An HMRC spokesman said: "These kinds of schemes don't work. We have investigated thousands of cases since 2013, bringing in over £200m in SDLT. These individuals have had to pay 100 per cent of the original tax due plus interest.

"They will be much worse off than if they had just paid the right tax at the right time, especially where they have paid fees to the promoter of the avoidance scheme which are not refundable."

David Hollingworth of London & Country said: "Recent Chancellors have been very clear that they are keen to eradicate complicated schemes designed to avoid tax.  As a result it could prove an expensive mistake for a landlord if HMRC investigates and subsequently decides that a scheme does not succeed in avoiding payment.

"It would be better for landlords to take stamp duty costs into account and factor them into their initial budgeting."

Landlords were quick to jump on the stamp duty surcharge when it was announced, but the extra expenditure is expected to be more than covered during a long term investment, be it from rental income, capital gains or differing combinations of both. Recent findings from the TDS charitable foundation show that over 60pc of landlords got into buy-to-let with the express intent of letting a property for income to put into a 'nest egg' for the future.