As the stamp duty holiday for first time buyers comes to an end, the Chancellor is coming under increasing pressure to take action on several loopholes which other property buyers are exploiting to avoid or reduce their stamp duty payment.
Companies all over the country boast that (for a fee) they can save buyers tens of thousands of pounds in stamp duty. There are two main methods by which this is done; In one ownership of the property is transferred to an offshore company, the whole company is then bought by the purchaser, who can then assume de facto ownership of the property. This way stamp duty can be reduced from 5 per cent to as little as 0.5, and the buyer is also protected from inheritance tax after they die.
The second common method of avoiding stamp duty involves trust arrangements, it is highly complex and technical and few people are willing to explain its workings in any detail. Would be buyers are advised that there are some very unscrupulous firms out there, who are not currently licensed or regulated by anyone.
While stamp duty avoidance tends to conjure images of wealthy businessmen buying multi million pound mansions in central London, many of those buying more modest properties are also attempting to avoid stamp duty.
HMRC insists they are already doing everything possible to clamp down on this, and that they do not believe any of the avoidance schemes are actually effective. A spokesman said: “HMRC are well aware of a variety of schemes being marketed as stamp duty avoidance methods. The fact is that none of the schemes we are aware of actually work. When people attempt to use we will pursue them for the tax which they owe.”.