HMRC Clamps Down On Stamp Duty Avoidance

The HMRC has won an important legal victory in its battle against tax avoidance by clamping down on schemes used to dodge stamp duty. The case relates to the misuse of “sub-sale relief” which is intended for use by genuine businesses to grant them an exemption from paying stamp duty twice. Developers for example are exempted from paying stamp duty on buying the property and then being charged additional stamp duty on the subsequent sale of the completed home.

The new measures will make businesses think twice before embarking on sub sale avoidance schemes, particularly in the residential market. Businesses looking to employ genuine sub-sale relief are advised to seek professional advice to ensure the scheme will be ratified by the HMRC.

New Seed Scheme Offers Significant Benefit to Investors

The new Seed Enterprise Investment Scheme (or SEIS) was launched by George Osborne late last year in a bid to boost investment in new start-up businesses in the UK. The SEIS scheme offers significant tax relief to angel investors in small start up companies. Investors in qualifying SEIS companies will be eligible for 50% tax relief to offset against their income tax in their next self assessment tax return. A capital gains tax exemption is also available if the SEIS investment is made from the proceeds of capital gains made in that same tax year. The only problem with the scheme is that many potential investors do not know about it! 

Qualifying SEIS companies must have assets less than £200,000 and investors are limited to investing £100,000 in any tax year. Investors can be directors in a company but must hold less than 30% shareholding in the business for a minimum period of 3 years. Investments in a relatives business will not qualify for SEIS. 

Investing under the current economic environment has become increasingly difficult. Share prices are exceptionally volatile and low interest rates have led to extremely low returns. Investors are having to take on the prospect of higher risk in order to preserve their savings from inflation which is expected to increase dramatically given the recent rise in fuel and food prices together with excessive money printing by the FED and the ECB. 

Investors looking to explore the potential for investment in new start-ups would be advised to discuss this with their accountant. Belsize Accountancy work with a number of exciting new start ups who are eligible for SEIS and are able to provide introductions on request. 

Please note that investing in start up businesses is significantly risky given the high failure rate of small businesses. Investors are advised to undertake appropriate due diligence prior to making their investment.

HMRC Investigates Film Partnerships

The HMRC is currently investigating two high profile film partnerships run buy a number of celebrities and leading businessmen. The HMRC has challenged the partnership structure over concerns that it is not trading for profit. The partnerships made losses in excess of £350m in their first year. 

The Limited Liability Partnerships are run by Ingenious Media and include borrowings made between linked businesses. Investors including David Beckham and Bob Geldof could face large tax bills if Ingenious does not win the appeal. 

The HMRC are taking a tough stance on film partnerships in their bid to tackle aggressive tax avoidance schemes. This case demonstrates the need for careful tax planning and the importance of engaging a professional tax advisor.