Upper Tribunal victory for HMRC in a leading SDLT anti-avoidance case

A tax tribunal has upheld a legal ruling against a Stamp Duty Land Tax avoidance scheme, protecting up to £123 million in tax.

Scheme user Project Blue Ltd had appealed against an earlier First Tier Tribunal decision relating to its purchase of the Chelsea Barracks in London. This appeal has now been rejected by the Upper Tribunal. The SDLT sub-sale alternative finance scheme was used in an attempt to eliminate all of the SDLT due on the purchase of the barracks.

Project Blue Ltd had previously argued that the transactions had been carried out for commercial reasons and not to avoid tax. However, the First Tier Tribunal ruled that the company had failed “to put forward evidence of all the factors that may have been taken into account” and failed to establish that tax avoidance was not a factor in their decision to proceed. The Upper Tribunal held that whether Project Blue Ltd intended to avoid tax was irrelevant.

The Upper Tribunal has decided Project Blue must pay £38 million in SDLT that would have been due if it hadn’t used the scheme. The First Tier Tribunal had previously assessed Project Blue Ltd to SDLT of £50m based on the notional land transactions.

The decision also affects 24 similar commercial cases and similar avoidance schemes with around 900 users, protecting another £85 million in tax.

This important case is the first to test a targeted anti-avoidance rule in the SDLT legislation.

David Gauke, Financial Secretary to the Treasury, said:

“HMRC’s position in this important case has now been backed twice by the courts. The message is clear – tax avoidance is complex, expensive and self-defeating. We continue to crack down on both avoidance and evasion – last year HMRC’s compliance activity brought in £23.9 billion”

Source: Reported on HMRC News 19.12.14 – http://goo.gl/YCEyMs