HMRC to combat Stamp Duty Land Tax mitigation schemes

HMRC’s aggressive approach to pursuing perceived underpayments of SDLT can result in discovery assessments being issued incorrectly. Karl Pocock and Matheu Smith explain the implications following a feature in the Mail on Sunday.

As outlined in our recent article "Stamp Duty Land Tax mitigation schemes under HMRC investigation" HM Revenue & Customs (HMRC) is adopting a more confrontational and aggressive approach to combating perceived tax abuse. Karl Pocock and Matheu Smith explain more recent developments in HMRC’s approach to counter-acting tax mitigation schemes involving stamp duty land tax (SDLT).

With stamp duty evasion costing the Treasury an estimated £200 million, HMRC continues to focus on unearthing perceived tax avoidance. Keystone Solicitor Matheu Smith was quoted in the Mail on Sunday recently with regard to the marketing of such schemes.

Last year, HMRC announced that it would be working with the Land Registry to identify transactions where it thought that insufficient SDLT had been paid.

During 2011 we witnessed the result of a number of these investigations. Once it has identified a perceived shortfall of SDLT, HMRC has (often without any prior notice) issued determinations and discovery assessments to tax payers requiring the recipient to pay the "unpaid" tax together with interest within a thirty day period. We expect this practice to continue throughout this year.

In addition, we have seen at least one example where HMRC has made a discovery assessment against a taxpayer that it seems it had no power to make. However, even though a discovery assessment may have been issued incorrectly, it will still need to be appealed in the proper manner and within the applicable thirty day time limit. Accordingly, we would strongly recommend that you urgently obtain legal advice from a suitably qualified advisor if you receive a discovery assessment, a notice of enquiry or a determination notice.

We have advised clients in relation to a number of these determinations and discovery assessments and we would be pleased to utilise this experience to assist you or your clients if you are unfortunate enough to receive such correspondence from HMRC.

Karl Pocock is a corporate tax specialist who regularly advises in relation to SDLT and Matheu Smith is a solicitor advocate who has particular experience in contentious tax matters.