A stamp duty land tax (SDLT) anti-avoidance scheme that has been widely used by residential purchasers has been stopped by measures announced in the Budget. The scheme broadly involved the purchaser granting an option simultaneously with completion of the acquisition of the property to an unconnected third party, exercisable many years in the future. The price paid for the grant of the option would be a nominal amount and option price on exercise would be the market value of the property at that time. The users of the scheme would pay no SDLT on the basis that SDLT sub-sale relief would apply such that SDLT was only payable by reference to the nominal option price.
HMRC had previously announced their view was that this structure did not work under the legislation, but the structure was still being widely used as some advisors did not agree with HMRC’s interpretation. The changes to be made to the legislation, which have effect for transactions on or after 21 March 2012, make it clear that the grant or assignment of an option will not fall within the sub-sale rules, putting the position beyond doubt. It is not clear if HMRC will continue to pursue previous users of this scheme but, given that they are currently litigating in relation to a number of structures that have been stopped by prior legislative changes, this is likely to be their plan.
The Government is clearly determined to stop the avoidance of SDLT. The Chancellor issued a statement that the Government will act swiftly to curb further SDLT abuse, with the use of retrospective legislation where appropriate. SDLT will also fall within the scope of the proposed new taxation General Anti-Abuse Rule (originally this was only proposed to apply to direct tax).