Memery Bank: ‘Project Blue’ — another nail in the coffin for tax schemes?

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By Tim Crosley

Last Friday saw the release of a very important tribunal decision on a stamp duty land tax (SDLT) mitigation scheme implemented in 2008 on the purchase of Chelsea Barracks. You may have read something about this in the weekend press. ‘Project Blue’ was the name of the buyer and the implementer of the SDLT scheme. The scheme failed and HM Revenue & Customs (HMRC) won the case.

This is not the first time that HMRC has taken a case on an SDLT scheme but it is the first time that the tax tribunal has directly considered HMRC’s SDLT ‘secret weapon’ — legislation in the form of a mini ‘general anti-avoidance rule’ for SDLT brought in as far back as December 2006, which was intended to put a stop to all SDLT schemes. It didn’t. But reading through this Project Blue decision, we are wondering why so many thought they could continue to market SDLT schemes with impunity. With potentially large numbers of taxpayers at risk of being badly burnt, there are now major risks to the reputations of a number of advisers. We are not surprised that HMRC won this case as emphatically as it did.

SDLT is a very unpopular tax. It is not paid on profit and it is payable at a time when buyers, whether commercial or residential, are already expending and quite possibly borrowing large sums of money. It is therefore no surprise that it has spawned a great variety of avoidance schemes. SDLT schemes are by their nature aggressive tax schemes, attempting as they do to make SDLT disappear (albeit replaced with sizeable fees charged by the scheme providers, together sometimes with an insurance premium that may not in fact protect the insured from all possible outcomes)…

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