There has been an increase in the number of firms providing services aimed at eliminating
STAMP DUTY on property purchases using mitigation schemes.
These are becoming increasingly popular among buyers of homes costing above £500,000 incurring the higher 4% rate of Stamp Duty Land Tax.
Most schemes operate with the buyer setting up a limited company with 'distinct and protected assets' before the purchase.
When the purchase takes place the company has a legal right to buy that property. The company's right to buy lasts for 100 years but it never taken up.
Mitigation experts then argue that as a contract has been made for the company to buy the property, a full land transaction has not taken place meaning that no stamp duty is payable at this point.
The purchaser (not the company) is named as the owner in the title deeds and is named on the Land Register.
Purchasers are required to send a letter to HMRC explaining what they have done.
It is claimed under the 2003 Finance Act that the HMRC has 9 months and 30 days to launch an investigation, if they do not do so, the purchaser has escaped all stamp duty liability.
However, HMRC officials dispute the legality of these schemes and warm any unpaid stamp duty land tax will be recovered.
There are some HMRC cases where SDLT is being demanded several years after the properties were bought.
London estate agents Hamptons, say 34% of all high-end London transactions now involve stamp duty avoidance schemes costing the exchequer £750million a year
