United Kingdom
Stamp Duty Land Tax and partnerships
Today's Budget has introduced, with immediate effect (subject to transitional provisions), measures to block certain SDLT planning arrangements using partnerships.
The measures attempt to disapply the favourable application of the partnership rules where SDLT mitigation schemes are being used. The focus seems to be on schemes which involve the creation of an artificial connection between an otherwise unconnected vendor and purchaser.
However, as the anti-avoidance provisions have no motive test, the changes could also impact on innocent transactions, for example transfers of property between individuals or personal companies and their own partnerships which involve more than just one simple step.
Comment
The measures are another step by HMRC to block tax avoidance schemes and are not wholly unexpected - although the level of commercial property transactions has been low over the last 18 months, the interest in SDLT mitigation has been high. Despite the uncertainty over the successful outcome of these mitigation schemes, the potential savings have made many deals commercially viable, which, without them, may not have been feasible in a depressed market. The schemes blocked today have been identified and targeted as a result of HMRC's disclosure regime.
Whilst it is understandable that the Treasury would wish to clamp down on wholly artificial arrangements, this is at the expense of ever increasing and complex Finance Acts. In this regard, we have reached a point where the intricacy of the UK's tax system and the manner in which legislation is interpreted by HMRC represents a substantial burden on businesses. It is inevitable that the measures announced today could have an adverse effect on many genuine commercial transactions as well as their intended targets.