Avoidance Cases

(Case Law)

Comment: HMRC rigorously challenges tax avoidance to ensure fairness and public service funding. This involves legal actions to deter schemes that undermine the tax system.

Key Points:

  • Tax avoidance reduces resources for public services.
  • HMRC is committed to investigating and challenging tax avoidance.
  • Legal actions are taken against schemes aimed at reducing tax liabilities.

Main Principles:

  1. Fairness and Compliance: Tax avoidance is considered unfair to taxpayers who comply with the law. Ensuring everyone pays their fair share is a core principle.
  2. Legal Scrutiny: HMRC closely examines transactions suspected of tax avoidance, often leading to legal actions and reassessments.
  3. Public Funding: Preventing tax avoidance helps secure adequate funding for public services, benefiting the wider community.
  4. Anti-Avoidance Legislation: The legal framework includes specific provisions to counteract schemes designed to avoid tax liabilities, emphasising the importance of genuine commercial purposes over tax benefits.

Why HMRC Takes Tax Avoidance Seriously

(Case Law>Avoidance Cases)

➤ HMRC rigorously challenges tax avoidance to ensure fairness and adequate funding for public services, often taking legal action to deter individuals and organisations using such schemes.

Tax avoidance undermines the tax system, reducing the resources available for public services and shifting the tax burden onto those who do not use tax avoidance schemes. It’s seen as unfair to the majority of taxpayers who pay what they owe. 

HMRC is committed to identifying, investigating, and challenging tax avoidance schemes, ensuring that everyone pays their fair share. This commitment is reflected in the rigorous scrutiny of suspected tax avoidance cases and the pursuit of legal action when necessary.

In the following pages, we will review specific cases that highlight HMRC’s efforts against tax avoidance. These cases shed light on the strategies employed by some organisations to reduce their tax liabilities, the legal arguments presented by both sides, and the ultimate decisions of the tribunals. Through these cases, we gain insight into the ongoing battle against tax avoidance and the principles that guide the interpretation and application of tax law in the UK.

 

Avoidance Case: Lease Transfer Ineligible for SDLT Group Relief, Market Value Assessment Required

(Case Law>Avoidance Cases)

The Tower One St George Wharf Ltd v The Commissioners for His Majesty’s Revenue and Customs (STAMP DUTY LAND TAX – Sub-sales – Group relief) [2022] UKFTT 00154 (TC) (30 April 2022). Cite as: [2022] UKFTT 00154 (TC).

URL: https://www.bailii.org/uk/cases/UKFTT/TC/2022/TC08481.pdf 

Transferring a property lease within a corporate group for tax avoidance makes it ineligible for Stamp Duty Land Tax relief, requiring a market value assessment.

Introduction The First-tier Tribunal dismissed an appeal against a Stamp Duty Land Tax (SDLT) assessment related to a property lease transfer within a corporate group, focusing on tax avoidance arrangements.

Example scenario where this case law principle is relevant In a real-life scenario, a company could transfer a property lease to another company within the same group to achieve financial flexibility and risk management. However, if the transfer is structured to also gain a significant tax advantage, it could be scrutinised under SDLT regulations, particularly if the transactions are part of a broader scheme with tax avoidance as one of its main purposes.

The legal principles agreed upon The Tribunal found that the lease transfer did not qualify for SDLT group relief due to arrangements aiming at tax avoidance, and the SDLT should be assessed based on the market value of the lease. It clarified that transactions forming part of a scheme with tax avoidance as a main purpose are ineligible for group relief, regardless of whether the tax advantage was ultimately realised.

General summary The case involved The Tower One St George Wharf Limited’s appeal against an SDLT assessment on acquiring a 999-year lease from a group company. The Tribunal concluded that the series of transactions, advised to achieve a corporation tax advantage, constituted arrangements with tax avoidance as a main purpose, disqualifying the transaction from SDLT group relief. 

It emphasised that the legality of tax avoidance schemes depends on their alignment with the intentions of Parliament and the broader context of their execution. The decision underscores the scrutiny on corporate transactions within groups, especially those structured to gain tax benefits, and reaffirms the principle that tax relief claims must align with genuine commercial purposes, not just tax avoidance.

 

Avoidance Case: SDLT Avoidance Schemes Ineffective Despite Retrospective Legislation

(Case Law>Avoidance Cases)

Redmount Trust Company Ltd v HMRC (STAMP DUTY LAND TAX – Sub-Sale Relief – Validity of Enquiry and Closure Notice) [2023] UKFTT 27 (TC) (05 January 2023). Cite as: [2023] UKFTT 27 (TC).

URL: https://www.bailii.org/uk/cases/UKFTT/TC/2022/TC08390.html 

Tax avoidance schemes for Stamp Duty Land Tax don’t work, even with retrospective laws, and HMRC can still assess and enforce tax due within legal time limits.

Introduction
Redmount Trust Company Ltd’s appeals against HMRC’s Stamp Duty Land Tax (SDLT) assessments were dismissed by the First-tier Tribunal.

Example scenario where this case law principle is relevant
This case illustrates the principle’s application in situations where a company implements a tax avoidance scheme related to SDLT, which is then challenged by HMRC through retrospective legislation and assessments. The company appealed against both a closure notice and a discovery assessment related to SDLT due on a property transaction, arguing the assessments were invalid due to procedural grounds and time limits.

The legal principles agreed upon
The Tribunal found that the tax avoidance scheme was ineffective in avoiding SDLT liability, even before considering the retrospective amendment that explicitly targeted such schemes. It was determined that the company’s land transaction return was not “voluntary” but required under law, thereby validating HMRC’s enquiry and subsequent closure notice. Additionally, the Tribunal found that HMRC’s discovery assessment was validly issued within the appropriate time limits, dismissing the company’s argument that it was out of time.

General summary
The Tribunal’s analysis focused on the effectiveness of the tax avoidance scheme, the nature of the land transaction return filed by the company, and the timing of HMRC’s discovery assessment. It concluded that the scheme did not achieve its intended tax avoidance outcome, and the return filed by the company was indeed required under the SDLT legislative framework, thus allowing HMRC to enquire and amend the return through a closure notice.

 Furthermore, the Tribunal found that HMRC’s later discovery assessment was issued within the statutory time limits, addressing a new legal argument raised by the company. This decision underscores the importance of the statutory framework governing SDLT and the limited circumstances under which HMRC can issue assessments beyond the normal time limits.

Avoidance Case: Tribunal Confirms HMRC Authority: Discovery Assessments Valid Despite Officer Identification

(Case Law>Avoidance Cases)

Wilby v Revenue And Customs (Income Tax – discovery assessment – stamp duty land tax) [2022] UKFTT 348 (TC) (08 September 2022). Cite as: [2022] UKFTT 348 (TC).

URL: http://www.bailii.org/uk/cases/UKFTT/TC/2022/TC08589.html 

HMRC can issue discovery assessments for under-declared Stamp Duty Land Tax based on discrepancies, without needing to specify which officer discovered the issue.

Introduction
This case involves an appeal against a discovery assessment for under-declared Stamp Duty Land Tax (SDLT).

Example scenario where this case law principle is relevant
In real estate transactions, if HMRC discovers a discrepancy between the SDLT declared and the actual transaction value recorded at the Land Registry, a discovery assessment can be issued to recover the under declared tax.

The legal principles agreed upon
The tribunal confirmed that HMRC has the authority to issue a discovery assessment when there is a significant mismatch between the SDLT return and the Land Registry records. The assessment’s validity does not hinge on identifying the specific HMRC officer who made the discovery, provided the decision was made following a structured and controlled process.

General summary
The tribunal dismissed the appeal, supporting HMRC’s decision to issue a discovery assessment for £21,700 in under-declared SDLT. The case centred on the purchase of a property in Harrogate, North Yorkshire, where the SDLT return significantly understated the transaction value compared to the Land Registry records. 

The tribunal found that HMRC’s process for identifying discrepancies was sufficiently rigorous to justify the assessment. It was determined that an HMRC officer had indeed made a discovery of under-declared tax, fulfilling both subjective and objective tests for issuing a discovery assessment. 

The tribunal’s decision underscores the importance of accurately declaring transaction values in SDLT returns and confirms the legal framework supporting HMRC’s authority to correct under declarations through discovery assessments.

Avoidance Case: HMRC Authorised to Issue Discovery Assessments for SDLT Underpayments

(Case Law>Avoidance Cases)

Bertelsen v Revenue & Customs (STAMP DUTY LAND TAX) [2021] UKFTT 76 (TC) (18 March 2021). Cite as: [2021] UKFTT 76 (TC).

URL: http://www.bailii.org/uk/cases/UKFTT/TC/2021/TC08061.html 

HMRC can issue discovery assessments for underpaid Stamp Duty Land Tax due to complex transactions if the taxpayer hasn’t fully disclosed the details within the enquiry window.

Introduction
The Bertelsen case revolves around an appeal against discovery assessments for Stamp Duty Land Tax (SDLT) issued by HMRC.

Example scenario where this case law principle is relevant
This principle applies in situations where property transactions involve complex legal structures aimed at reducing SDLT liability. For instance, if a couple acquires a property and employs specific legal mechanisms to declare a lower tax, HMRC may issue discovery assessments if it later identifies an underpayment of tax due to these arrangements.

The legal principles agreed upon
The tribunal confirmed that HMRC is entitled to issue discovery assessments if it finds an underpayment of SDLT due to complex transaction structures, provided the discovery is made within the relevant time limits and the taxpayer hasn’t made a full and frank disclosure within the enquiry window.

General summary
The Bertelsens appealed against discovery assessments related to their acquisition of a residential property, arguing they had disclosed the transactions within the enquiry window and that any discovery by HMRC had become “stale.” 

The tribunal found that HMRC made a valid discovery of an underpayment of SDLT in November 2011, after identifying the Bertelsens as participants in a scheme designed to avoid SDLT. The tribunal determined that the information provided by the Bertelsens, although sent to HMRC, was not sufficient to preclude the discovery assessments. 

It was concluded that HMRC’s discovery was timely and not “stale,” and that the Bertelsens’ disclosure did not meet the threshold of full and frank disclosure required to prevent HMRC from issuing the assessments. The appeal was dismissed, upholding the validity of HMRC’s discovery assessments.

 

Avoidance Case: “Key Legal Principles Defined for HMRC’s SDLT Discovery Assessments and Assessment Limitations

(Case Law>Avoidance Cases)

Gray v Revenue & Customs (STAMP DUTY : Land tax) [2019] UKFTT 213 (TC) (28 March 2019). Cite as: [2019] UKFTT 213 (TC).

URL: https://www.bailii.org/uk/cases/UKFTT/TC/2019/TC07060.html 

HMRC can reassess Stamp Duty Land Tax if the initial return underreports the transaction value, provided the discrepancy wasn’t obvious from the information given at the time.

Introduction
This case involves an appeal by Mr. Timothy Gray against an additional stamp duty land tax (SDLT) assessment made by HMRC for a property purchase in Ripon, North Yorkshire.

Example scenario where this case law principle is relevant
In a scenario where a property is purchased and the SDLT return shows a nominal consideration (£1) not reflective of the actual transaction value, leading to an HMRC investigation and subsequent assessment for underpaid tax.

The legal principles agreed upon
The main legal principles established include the conditions under which HMRC can make a discovery assessment for SDLT, the importance of accurate and complete disclosure in SDLT returns, and the limitations on HMRC’s ability to assess based on information available at the time of the return.

General summary
The case centres on an SDLT return filed by Mr. Gray, showing a £1 consideration for a property whose actual purchase price was £860,000. HMRC, after identifying the discrepancy through a data matching exercise, issued a discovery assessment for an additional £34,400 in SDLT. Mr. Gray appealed, arguing there was no discovery, the discovery was stale, and HMRC was precluded from making the assessment due to restrictions in paragraph 30 Schedule 10 Finance Act 2003. The tribunal found that HMRC made a valid discovery of a loss of tax, as the information available at the time of the return did not enable an HMRC officer to be aware of the underpayment. The appeal focused on whether the information provided to HMRC, including the SDLT return and a letter purportedly sent by Mr. Gray to HMRC, was sufficient to alert them to the potential underpayment. The tribunal concluded that the information in the SDLT return did not adequately disclose the transaction details necessary for HMRC to assess the correct SDLT liability. The case highlights the importance of full and accurate disclosure in SDLT returns and supports HMRC’s use of discovery assessments in cases where underpayment of tax is identified after the initial return is processed. The decision was against Mr. Gray, with the tribunal upholding the additional SDLT assessment.

Avoidance Case: Scrutiny of Connected Party Transactions, Annuity Valuation Limits, and Anti-Avoidance Provisions”

(Case Law>Avoidance Cases)

M & M Builders (Norfolk) Ltd v Revenue & Customs (TAMP DUTY LAND TAX – whether two transactions between connected parties constitute an exchange) [2019] UKFTT 541 (TC) (19 August 2019. Cite as: [2019] UKFTT 541 (TC). 

URL: http://www.bailii.org/uk/cases/UKFTT/TC/2019/TC07335.html 

Transactions between connected parties are closely checked for Stamp Duty Land Tax, focusing on true market values and preventing tax avoidance.

Introduction
This case involves M & M Builders (Norfolk) Ltd appealing against a closure notice issued by HMRC, which amended the company’s Land Transaction Return and increased the Stamp Duty Land Tax (SDLT) due from £36,000 to £180,000 for a property transaction.
Example scenario where this case law principle is relevant In real life, this principle could apply in situations where companies engage in property transactions with connected parties, especially when trying to minimise SDLT through the valuation of annuities or exchanges between connected parties. It emphasises the importance of accurately declaring transactions and the potential consequences of anti-avoidance provisions.

The legal principles agreed upon
The tribunal agreed on several key legal principles:

  1. Transactions between connected parties must be scrutinised for SDLT purposes, especially regarding the market value of properties involved.
  2. The valuation of annuities in property transactions is limited to twelve years’ payments unless market value provisions apply.
  3. Anti-avoidance provisions (s75A Finance Act 2003) can apply if transactions result in less SDLT than would be payable on a notional transaction reflecting the actual market value.

General summary
The tribunal found that M & M Builders’ transaction did not constitute an exchange that would allow for the valuation of the property based on the annuity payments alone. Instead, because the parties were connected, the market value of the property (£1,200,000) should be considered the chargeable consideration for SDLT purposes. The tribunal dismissed the appeal, upholding HMRC’s closure notice and emphasising the application of market value provisions and anti-avoidance rules in transactions between connected parties. This case highlights the scrutiny applied to property transactions involving connected parties and the importance of considering market value and anti-avoidance provisions in determining SDLT liabilities.

Avoidance Case: Legal Precedents Set in Landmark Case on SDLT Interpretation and Anti-Avoidance Measures 

(Case Law>Avoidance Cases)

Geering & Ors v Revenue and Customs (STAMP DUTY : Land tax) [2018] UKFTT 233 (TC) (23 April 2018). Cite as: [2018] STI 1170, [2018] UKFTT 233 (TC), [2018] SFTD 1115.

URL: https://www.bailii.org/uk/cases/UKFTT/TC/2018/TC06466.html 

Complex property purchase schemes to avoid Stamp Duty Land Tax can be caught by anti-avoidance laws, considering money for shares as indirect payment.

Introduction
This case involves an appeal against Stamp Duty Land Tax (SDLT) determinations related to a property purchase avoidance scheme.

Example scenario where this case law principle is relevant
In real life, this principle could apply to situations where individuals or entities attempt to use complex schemes involving unlimited companies and distributions in specie to avoid paying SDLT on property transactions.

The legal principles agreed upon
The main legal principles established in this case include the interpretation of indirect consideration under s 45(3)(b)(i) of the Finance Act 2003 in the context of SDLT, and the application of the anti-avoidance provision s 75A of the same act. The tribunal found that contributions for shares could be considered indirect consideration for property purchases, and that the anti-avoidance rules could apply to transactions designed to reduce SDLT liability.

General summary
The Geering & Ors v Revenue and Customs case revolved around appeals against SDLT determinations issued by HMRC. The appellants participated in a marketed avoidance scheme involving the purchase of properties by unlimited companies, followed by a reduction in capital and distribution in specie of the property to avoid SDLT. The tribunal examined whether contributions for shares constituted indirect consideration for the purchase of property and whether the anti-avoidance rules in s 75A were engaged. It was determined that the scheme transactions were pre-ordained with the intention that monies paid for share subscriptions would be used to purchase properties, thereby constituting indirect consideration. Furthermore, the tribunal found that the anti-avoidance provision s 75A applied, resulting in the transactions being disregarded for SDLT purposes, and a notional land transaction affecting the acquisition of the chargeable interest by the purchaser was deemed to have occurred. 

This decision highlights the careful scrutiny applied to avoidance schemes and the interpretation of SDLT legislation, reinforcing the principle that indirect contributions can be considered as consideration for property transactions within the context of SDLT.

Avoidance Case: Tribunal Clarifies SDLT Laws, Emphasising Timing, Nature of Transactions, and Statutory Obligations

(Case Law>Avoidance Cases)

Crest Nicholson Operations Ltd v Revenue and Customs (STAMP DUTY : Land tax) [2017] UKFTT 135 (TC) (01 February 2017). Cite as: [2017] UKFTT 135 (TC. 

URL: http://www.bailii.org/uk/cases/UKFTT/TC/2017/TC05629.html 

Complex schemes to reduce Stamp Duty Land Tax through corporate actions are scrutinised, emphasising the timing, nature of transactions, and legal obligations.

Introduction
This case involves Crest Nicholson Operations Ltd and its subsidiaries’ appeal against Stamp Duty Land Tax (SDLT) determinations and an assessment made by HM Revenue and Customs (HMRC).

Example scenario where this case law principle is relevant
In a real estate development scenario, a company might attempt to reduce SDLT liability through corporate restructuring and property transfer schemes. This case illustrates the legal scrutiny such arrangements can undergo, particularly regarding the application of SDLT laws and the roles of entities within a corporate group.

The legal principles agreed upon
The tribunal clarified the application of SDLT laws, particularly focusing on the concepts of “bare trust,” “undisclosed agency,” and the implications of corporate actions like share capital reduction and property transfer assignments. It emphasised the importance of the timing and nature of transactions, the interpretation of contractual agreements, and the statutory obligations for SDLT returns.

General summary
The tribunal examined the complex arrangements between Crest Nicholson Operations Ltd and its subsidiaries, involving the acquisition of land and subsequent corporate actions intended to mitigate SDLT liability. The case dissected the legal definitions and obligations under SDLT legislation, scrutinising the roles and actions of the involved entities, including the execution of a “bare trust” and the implications of failing to submit SDLT returns. 

The decision underscored the necessity for clear compliance with SDLT laws, highlighting the conditions under which SDLT liabilities are determined and the potential for HMRC to issue assessments based on discoveries of tax liabilities. 

The outcome serves as a cautionary tale for companies employing intricate schemes to reduce tax liabilities, demonstrating the legal complexities and potential challenges they might face from tax authorities.

Avoidance Case: HMRC’s Enquiry Validity Upheld, No Time Limit for Closure Notice

(Case Law>Avoidance Cases)

Redmount Trust Company Ltd v Revenue and Customs (STAMP DUTY LAND TAX – land transaction return – validity of a document purporting to be a land transaction return) [2023] UKUT 68 (TCC) (16 March 2023)

https://www.bailii.org/uk/cases/UKUT/TCC/2023/68.html 

HMRC can investigate SDLT returns anytime and issue closure notices without a specific deadline, challenging SDLT avoidance strategies.

Introduction
The case involves Redmount Trust Company Ltd appealing against decisions related to stamp duty land tax (SDLT) due on a property purchase.

Example scenario where this case law principle is relevant
This principle applies in scenarios where entities engage in property transactions with arrangements intended to avoid SDLT, questioning the validity of documents and HMRC’s enquiry and closure notice timelines.

The legal principles agreed upon
The main legal principles established include the validity of HMRC’s enquiry into what was deemed a “voluntary” land transaction return and the absence of a time limit for HMRC to issue a closure notice following an enquiry.

General summary
The case centres around Redmount Trust Company Ltd’s appeal against a First Tier Tribunal (FTT) decision, which upheld HMRC’s closure notice demanding £294,000 in SDLT. 

Redmount had engaged in arrangements aiming to exploit sub-sale relief to avoid SDLT on a London property purchase. The Upper Tribunal (UT) examined whether the land transaction return filed by Redmount was voluntary, given the arrangements aimed to avoid SDLT, and whether HMRC was entitled to enquire into this return. The UT also considered if there was a time limit for HMRC to issue a closure notice after opening an enquiry. The UT concluded that HMRC was entitled to enquire into the return, regardless of its voluntary nature, as the return was filed in anticipation of it possibly being a notifiable transaction. This decision was based on the understanding that once a return is filed, HMRC has the authority to enquire into it to ascertain the correct SDLT due. Furthermore, the UT determined there was no specific time limit within which HMRC must issue a closure notice after initiating an enquiry, providing HMRC flexibility in conducting thorough investigations. This case underscores the broad scope of HMRC’s powers to enquire into SDLT returns and amend them as necessary, emphasising the importance of compliance and the challenges of SDLT avoidance schemes.

Avoidance Case: Tribunal Defines Legal Principles for SDLT Avoidance Schemes in Property Acquisition by Shareholders

(Case Law>Avoidance Cases)

Michael and Bridget Brown v Revenue and Customs (STAMP DUTY AND LAND TAX – avoidance scheme – arrangement under which house sold to unlimited company and then to shareholders on reduction of share capital) [2022] UKUT 298 (TCC) (14 November 2022). Cite as: [2022] WLR(D) 502, [2023] 4 WLR 11, [2022] STC 2115, [2022] BTC 533, [2022] UKUT 298 (TCC). 

URL: https://www.bailii.org/uk/cases/UKUT/TCC/2022/298.html 

SDLT avoidance involving corporate structures and property transfers to shareholders is closely scrutinised, focusing on the real economic transactions and appropriate tax charges.

Introduction
This case involves Mr. and Mrs. Brown’s appeal against a decision imposing a liability for Stamp Duty Land Tax (SDLT) on them due to their acquisition of a house through a complex avoidance scheme.
Example scenario where this case law principle is relevant
In a real-life scenario, this principle could apply to individuals attempting to use corporate structures and financial manoeuvres to avoid SDLT on property transactions, particularly where properties are transferred through companies to individuals in a way that seeks to exploit tax relief provisions.
The legal principles agreed upon
The main legal principles established in this case revolve around the application of SDLT avoidance schemes, specifically how SDLT liabilities are determined when properties are acquired through companies by shareholders. The tribunal clarified the interpretation of “consideration” in the context of SDLT, particularly focusing on transactions involving sub-sales and the distribution of property as part of a company’s share capital reduction.

General summary
The Browns attempted to avoid SDLT on the purchase of a house by first selling it to a company they owned and then transferring it to themselves as shareholders upon the reduction of the company’s share capital. This scheme aimed to exploit SDLT relief provisions for sub-sales. However, the tribunal found that the SDLT liability should be calculated based on the actual consideration paid for the property, including the amount paid to acquire shares in the company used to purchase the house. This decision emphasises the tribunal’s approach to interpreting tax legislation in a way that counters avoidance schemes, ensuring that transactions reflecting the economic reality are subject to appropriate tax charges. The case underscores the principle that SDLT planning involving artificial structures and pre-ordained series of transactions designed to exploit statutory reliefs will be closely scrutinised, with a focus on the substance over form to determine the true tax liability.

Avoidance Case: Tribunal Empowered to Issue Closure Notice: Balancing HMRC’s Tax Collection with Taxpayer Rights

(Case Law>Avoidance Cases)

Frosh & Ors v Revenue and Customs (STAMP DUTY LAND TAX) [2017] UKUT 320 (TCC) (8 August 2017). Cite as: [2017] BTC 530, [2017] STI 1859, [2017] STC 1941, [2017] UKUT 320 (TCC)

URL: https://www.bailii.org/uk/cases/UKUT/TCC/2017/320.html 

Tribunals balance HMRC’s need to collect taxes with taxpayers’ rights, allowing continued investigations into complex tax avoidance without mandating immediate closure notices.

Introduction
This case involves an appeal against the refusal to issue closure notices for enquiries into Stamp Duty Land Tax (SDLT) returns.
Example scenario where this case law principle is relevant
In real estate transactions involving complex tax avoidance schemes, such as the “Project Blue scheme,” this case law principle could be applied when taxpayers seek closure notices from HMRC for their SDLT returns, indicating the end of an enquiry.
The legal principles agreed upon
The main legal principles established include the tribunal’s discretion to issue a closure notice if HMRC does not have reasonable grounds to continue an enquiry without providing a specified period. It also clarified the tribunal’s role in balancing the need for HMRC to collect tax properly and the taxpayer’s right to a timely resolution of enquiries.

General summary
The case revolved around the refusal of the First-tier Tribunal (FTT) to direct HMRC to issue closure notices for enquiries into SDLT returns related to the “Project Blue scheme,” a tax avoidance strategy. The appellants argued that HMRC had enough information to issue closure notices and that their continued enquiries were unreasonable. The Upper Tribunal examined whether HMRC had reasonable grounds for not issuing closure notices within a specified period, focusing on the legal and factual context of the SDLT planning arrangements and the specific information HMRC sought from the appellants. The tribunal highlighted the importance of HMRC having specific information about individual transactions to make informed decisions on tax liabilities, distinguishing between generic understanding of tax avoidance schemes and detailed knowledge of individual cases. It was determined that it was not unreasonable for HMRC to continue their enquiries without issuing closure notices, given the complexity of the tax avoidance scheme and the need for specific transactional information.
The decision underscored the tribunal’s discretion in handling closure notice applications and emphasised the balance between HMRC’s duty to ensure proper tax collection and the taxpayer’s interest in resolving tax enquiries promptly. The appeal was dismissed, affirming the FTT’s decision and the approach to managing enquiries into complex tax avoidance schemes.

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This Article Written By Nick Garner
Founder Stamp Duty Advice Bureau
Author of Stamp Duty Land Tax Guide
For Property Investors.