The term stamp duty mitigation is a tax avoidance scheme that occurs during a property transaction. Buyers are usually expected to pay a tax after they fully purchase a house. This fee is paid for the benefit that the buyer gains upon buying a property. Taxes are payable for property values exceeding a given amount. Taxes are exempted for properties with non-taxable values, and for many first-time buyers. These taxes are usually very high especially if the cost of a property is high. The rates of taxes have been increasing over the past few years. This is the reason why many buyers opt to avoid the taxes.
Stamp duty mitigation is undertaken by solicitors either when working by themselves, or alongside accountants. These solicitors advertise their ability to help buyers avoid taxes in cryptic media. This is because the government is very strict about tax evasion and will prosecute anyone who engages in this behaviour. There are many ways in which solicitors can help you avoid paying taxes. The solicitors who engage in stamp duty mitigation never disclose their methods of mitigation to buyers unless the buyers sign Confidentiality Clauses or Non-Disclosure Agreements. Some solicitors entice their clients into tax avoidance by promising them that they will not charge solicitor fees if the scheme fails. This together with the fact that a lot of money is saved when a buyer avoids paying taxes makes stamp duty tax avoidance very popular.
There are many schemes that solicitors may use to avoid paying taxes. One of these is getting a buyer to purchase a property through a company. Companies used are usually fictitious and cease to exist after conveyance is over. The company buys a given percentage of the house that cannot be taxed. The house is then sold to a buyer after which the rest of the value of the house is paid.
The other scheme that is used in tax avoidance is purchasing a property in bits. A buyer may purchase fittings and fixtures of the house separately. This he can do by taking advantage of the minimum house components of a house that can be taxed by Her Majesty’s Revenue and Customs (HMRC). Buying a property this way considerably reduces the value of the property such that the amount of tax payable is significantly reduced or annulled altogether.
A buyer may also avoid paying taxes by processing documents abroad. The resulting house sale will be outside the jurisdiction of the HMRC. The HMRC is therefore blocked from levying tax.
The government is acutely aware of these and other schemes that solicitors use to avoid paying stamp duty land tax. The government has enacted various legislations to close the loopholes that solicitors use to avoid paying taxes. More legislations are coming up. The old ones are also being updated to cater for newer tricks. The loopholes are closing quickly meaning that a scheme that worked at one time may not succeed if applied at a different time.
Tax evaders are heavily punishable by the law. The government can demand payment of tax if it discovers a tax evader. The government may also charge interest of the tax and even demand a payment of 100% of the stamp duty.