Principles based approach to avoidance through transfers of income streams

The advantage for those who are able to sell income streams from property is that, when successful, they no longer fall within income tax at up to 40% but within capital gains tax at 18%. This is an evolving area of tax law and it remains to be seen how an anti-avoidance rule that operates on the basis of principle rather than countering specific arrangements will work but if it is seen as successful similar arrangements are likely to follow in other areas.

Disclosure of tax avoidance schemes – SDLT

The specific Disclosure rules for notifying SDLT planning arrangements do not extend to identifying actual transactions that have taken advantage of the arrangements notified.  Nor does the scheme currently enable indirect land transactions to be notified (for example, the sale of a company owning land rather than the land itself).  There has been a suggestion that the scheme will be extended to cover both these gaps in the notification obligation.

Linked transactions – SDLT

The SDLT holiday for land transactions not exceeding £175,000 has proved to be rather ineffective and other options for helping the property market are being considered.

One area is that of linked transactions.  Where a number of properties are sold as a package, the legislation requires the total consideration to be used to determine the rate of tax.  Hence if a block of 25 flats is sold for £2.5 million (say £100,000 each) the SDLT payable is £100,000 (4% of £2.5 million) whereas the sale of each individually would be not chargeable at all as each is within the nil rate band. As many developers are endeavouring to off load developments to raise capital, an easing of this anti-avoidance rule may have a significant impact.