HMRC has won a Court of Appeal case concerning attempts by property fund DV3 to avoid paying Stamp Duty Land Tax (SDLT) on its purchase of the Dickins & Jones building on London's Regent Street in 2005.

In the case, Commissioners for HMRC v DV3 RS Limited Partnership [2013] EWCA Civ 907, DV3 employed a SDLT scheme which saw it use a partnership registered in the British Virgin Islands (BVI) to buy the building for £65.1m. On the same day as the purchase, the property was transferred to the BVI company for a nominal sum that fell below the stamp duty threshold. Under this arrangement, DV3 saved around £2.6m in SDLT.

The scheme involved a combination of the SDLT sub-sale rules and the partnership rules to mitigate the tax payable, and was challenged by HMRC, who initially lost the case in the First Tier Tribunal (FTT). On appeal the Upper Tribunal (UT) confirmed the decision of the FTT, but the Court of Appeal has now allowed HMRC's appeal from the UT, and consequently the £2.6m SDLT is now payable.

Alex Barnes, real estate tax partner at law firm Irwin Mitchell, said: 'In light of the decision in this case HMRC has a clean sweep of victories in the recent SDLT avoidance cases it has brought to Court namely Vardy, Allchin and the Project Blue (Chelsea Barracks) case.

'With deep pockets and a mandate to aggressively attack SDLT avoidance schemes, those organisations which have previously implemented them, or are in the process of doing so, should be ready for HMRC to challenge these and to continue to do so should any Court decision not go their way,' Barnes stated.

HMRC said the appeal ruling will establish a precedent for 87 further cases where the same scheme was used, raising £68m for the taxpayer. DV3 has indicated it now intends to take the case to the Supreme Court for a final judgment.

To read the judgment, click HERE