Reports suggest (and I've no reason to doubt them) that the Labour Party has sold a property using a stamp duty avoidance scheme.
Gordon Brown is directly responsible for this. The loss of government revenue is reported to be £210,000.
He should be ashamed of himself.
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Interesting situation here and no one should be surprised to see opposition parties seek to make capital on what may, in my view, be a storm in a teacup. Whether it is also valid to say this is tax avoidance is questionable, as we do not have many facts. I am not a Labour supporter by the way, far from it.
I am making the crucial assumption here that this was not a scheme entered into specifically for the avoidance of Stamp Duty Land Tax (SDLT) on a known disposal of the property. If such were to be the case, then of course the Labour Party would have egg all over its face. It is common in such schemes for the tax avoided to be shared between the parties – ie the Labour Party would only have entered into the scheme if it received payment for say 50% of the SDLT saved.
I am further assuming that this was the common situation of a simple sale of a property holding company (stamp duty 0.5% on shares) rather than sale of the property held by the property holding company (SDLT 4% on sale of the land). Of course in both cases it is actually the purchaser who pays the tax (stamp duty or SDLT), not the seller, so the Labour Party has not avoided tax at all, it is the purchaser who has had to pay less tax. I guess this would cut no ice here as the price commanded on sale would reflect the tax advantage.
In this situation, in order for no SDLT to be payable by the Labour Party on the sale of the property holding company, the property must
¬? have been acquired by the property holding company from outside the Labour Party some time ago; or
¬? have been transferred by another Labour Party company holding that property to the property company being sold (stamp duty or SDLT group relief would have been available on the transfer) and the transferee company now holding the property must have held the property for a minimum 3 year period before being sold by the Labour Party and not have had sale arrangements in place at the time of its acquisition of the property. The Labour Party might however at the time of the transfer have had in mind a possible future sale of the property/property company.
So we are not talking here about an instant tax avoidance scheme, but a property owner arranging its commercial affairs some time ago, without an immediate sale or purchaser in view.
It is important also to appreciate that there are real differences between sales of companies and of properties – both tax and non-tax and a tax saving using a corporate sale may be only incidental to the real reason for that route. For non-tax considerations, perhaps the most important relate to liabilities following the company rather than remaining with the seller and TUPE advantages for a vendor in cases of employees transferring with a corporate sale.
But my real question here is if this was a normal sale by the Labour Party of a property holding company which had held the property for a substantial period of time, rather than a sale by that company of its property, should the vendor be forced to sell the property (causing the purchaser 4% SDLT rather than 0.5% stamp duty) in order to avoid accusations of tax avoidance? In other words if we do not arrange our affairs to pay the MAXIMUM amount of tax, are we engaged in tax avoidance (and if so is that avoidance acceptable or unacceptable? And should the (probable) important non-tax advantages to the Labour Party of a sale of the company rather than the property be ignored in order that the maximum tax is extracted?
Thanks Roger
Interestting analysis
Anyone know if the Labour Party has commented?
If this is a transaction of the type Roger suggests possible there may have been misinformation in the story I quoted
Richard
Interesting Richard, Rogers posting to which I have no objection, as he states, ‘if we do not arrange our affairs to pay the MAXIMUM amount of tax, are we engaged in tax avoidance’ is something you don’t pick up on, or comment on.
Yet in previous posts we have engaged over this very point, that the tax payer has the right to arrange their affairs in such a way that they pay the correct amount of tax under current legislation, something the Labour party has done here, yet something you have previous taken the profession to task over.
Your position on this is starting to look unclear to me Richard?
Jason
Unclear? What’s unclear. I’ve never said that the taxpayer has a right to arrange their affairs so that they pay the correct (by which I presume you mean minimum in this conext, since you are polarising with a rather odd comment on maximisation to which I did not respond as it is so obviously inappropriate) tax.
There are two reasons. ‘Correct’ cannot be defined. There are usually choices in law. So it is a meaningless concept. Minimum is the Duke of Westminster principle from another age which is now a lifetime away in terms of changes in social development and ethics. Again, it cannot be defined.
I say one should pay the right amount of atx at the right place in the right time. This is that due within the spirit of the law, which I do happen to believe can be determined by those who have a will to do so. It is most certianly not a maximum, and I ignore such comments: they are clearly designed to provoke but are aobviously meaningless.
The point is this. You’re seeking a defintion as a noun. I am using a management appraoch, which is to use the words as verbs. The outcome is very different.
Richard