Steps taken by the Chancellor to close a potential stamp duty loophole have been given the judicial stamp of approval by one of the country’s top judges. She ruled that they were not ‘disproportionate’.
Mrs Justice Andrews rejected a challenge by participants in a stamp duty avoidance scheme who claimed that the government used retrospective legislation to close it down.
They argued that this move, announced by the Chancellor in Budget 2012, was ‘disproportionate’ because it would only save the Exchequer around £7m.
But the judge told them in her written decision: ‘However attractively that submission has been dressed up by counsel, my conclusion that it is wholly without merit may come as little surprise.’
For the case to proceed to a full hearing she said that the claimants needed to show they had a real prospect of success and added: ‘They fall short of that threshold by a considerable margin.’
In a complex judgment, she said: ‘Benjamin Franklin famously identified tax as one of life's two certainties.
‘However, the aphorism must be subject to some qualification; for as long as taxes have existed, people have been devising ways to avoid paying them without breaking the law.’
The judge said that these claimants took part in the so-called Blackfriars scheme, structured by advisers Blackfriars Tax Solutions LLP to minimise their exposure to Stamp Duty Land Tax (SDLT).
They sought to challenge provisions of the Finance Act 2013 which amended section 45 of the Finance Act 2003 with retrospective effect from 21 March 2012, making stamp duty chargeable in full on transactions under the Blackfriars scheme.
However, rejecting claims that the step was disproportionate, the judge said: ‘It was and is a legitimate and important aim of UK public policy in fiscal affairs to ensure that everybody buying property pays their fair share of SDLT.
‘It was, therefore, within the permissible area of discretionary judgment of parliament to legislate, with retrospective effect, to prevent taxpayers from using, by wholly artificial arrangements, s45 of the FA 2003 so as to produce an outcome which was the very opposite of what parliament had intended.’
The scheme involved a double agreement under which A exchanges contracts to sell a property to B at market value but on the same day as completion B grants C an option to purchase the property. SDLT would apply to the option, not the property sale, but would only be due on exercise many years into the future. The intention would be that the option would never be exercised.