Stamp Duty Land Tax Avoidance: Fiducia Warned by HMRC about Misleading Advertising

Marketed as within government approved statutory rules, HMRC deemed Fiducia’s stamp duty land tax scheme as tax avoidance. The misleading advertising scandal arose as Fiducia claimed the scheme promised tax relief on Stamp Duty Land Tax (SDLT). According to statements from HM Revenue and Customs, the tax avoidance scheme claimed to offer savings of 60% on residential property purchases. However, in practice, no SDLT was paid on the residential property purchases and Fiducia kept 40% of the balance as its fee. The elaborate abuse of a legitimate tax relief scheme was arranged by way of a complex series of transactions. While maintaining that certain types of residential property purchases are exempt from SDLT, HMRC claimed Fiducia manipulated the SDLT tax relief exceptions. In the case that a mortgage provider takes a “security interest” in a property as security for a mortgage, the legal exemption provides tax relief by not requiring the payment of SDLT. However, through complex transactions, Fiducia misused this exemption and, ultimately, paid no SDLT.

Fiducia’s misleading advertising scandal arose at a time when a series of successive stamp duty increases left property investors scrambling to save money. In April 2016, following the three-percentage point surcharge increase, a host of schemes designed to manipulate legitimate tax relief mechanisms emerged. Many property buyers seeking to sidestep SDLT were taken by the tax avoidance schemes. Yet, eventually found themselves considerably out of pocket, and faced with having to pay the original stamp duty and in certain instances fines and costs on top.

Since 2017, HMRC has pursued numerous property buyers and is demanding payment for the misuse of SDLT tax relief. To make matters worse, it is also adding 100% to the outstanding bills as a penalty. According to some sources, payment relating to fraudulently acquired tax relief run into the tens of millions of pounds.