An American actress’s dream of owning a British farm is under attack by HM Revenue and Customs, which is reviewing all aspects of her affairs under the guise of a stamp duty probe.
Sarah Cardew, head of tax at law firm Irwin Mitchell Private Wealth, is arguing the case with HMRC and said her client was being targeted because the taxman is looking for a “big name scalp”.
Cardew has successfully contested several similar cases where properties have been classified as mixed-use for the purpose of stamp duty land tax (SDLT).
Multi-purpose property
Huge sums in tax can be saved if a property can show it has both commercial and residential uses.
SDLT is a tax charged to buyers purchasing properties worth more than £125,000 (residential) and £150,000 (commercial).
For residential stamp duty, rates are arranged in four tiers above the £125,000 ($164,150, €140,570) nil rate band, up to £1.5m when buyers pay 12% on the remaining portion.
If the property is commercial or mixed use there are two tiers above the nil rate band; 2% on £150,000 to £250,000, and 5% above £250,000.
A typical route to claiming a property is mixed-use is to have land let for grazing, which must be fenced off, an official grazing licence is useful, it must have its own access, and it helps if it has its own water supply.
Through this route, Cardew successfully claimed £210,000 of tax relief in another case. HMRC pushed back but was ultimately unsuccessful.
HMRC goes fishing
The open case involving the unnamed A-lister has devolved into a fishing trip, according to Cardew, who said investigators had asked for the contract and details of the couple who look after the property when the main house is unoccupied.
“It is not about SDLT, it is a fishing expedition,” said Cardew of the probe.
Speaking at a private client briefing on Tuesday, she said: “I think there is going to be something on SDLT reform in the next budget. There are a lot of people taking advantage of [the mixed-use rate] and a lot of people being enquired into.”
For commercial rate payers, she said the rules could be “mind-bogglingly confusing and complicated”, reinforcing the case for reform of the unpopular tax.
HMRC can launch a stamp duty investigation up to nine months after a transaction or 21 years later if they suspect fraud.
