Disclosure of Tax
(DOTAS): Stamp Duty
Consultation Response Document
9 December 2009
Chapter title Page no.
Executive Summary 3
Next steps 9
Annex A List of Stakeholders Consulted 10
At Budget 2009 HMRC published the Consultation Document “Disclosure of Tax Avoidance Schemes
(DOTAS): Stamp Duty Land Tax” on the HMRC website at http\www.hmrc.gov.uk inviting comments by
15th July 2009. The consultation included draft regulations, explanatory notes and a consultation stage Impact
Assessment on extending DOTAS to capture new and innovative avoidance schemes involving high value
residential property and arrangements for identifying users of all disclosed SDLT schemes.
The responses were generally supportive of the proposals, although comments were made on some specific
aspects. HMRC has carefully considered these comments and will make some changes to the legislation as a
Regulations will be made and laid before Parliament to come into effect no later that 1 April 2010. An updated
Implementation Stage Impact Assessment and revised guidance will be published alongside the revised
regulations and well in advance of these changes coming into force.
HMRC wishes to thank those who responded to the consultation document. We recognise the time and effort
involved in making these contributions. A list of respondents and contributors to the consultation can be found
at Annex A.
In 2007 HMRC became concerned by evidence of tax avoidance schemes being used for the purchase of high
value residential property. HMRC were also encountering difficulties with not being able to identify users of
SDLT avoidance Schemes. An announcement was made at Budget 2008 that the Disclosure Regime would be
extended to capture schemes that concerned residential property with a value of at least £1m and that a
system would be introduced to identify users of all disclosed SDLT avoidance schemes. A consultation
document was published on 22nd April 2009 which sought views on -
1. The descriptions of SDLT residential property schemes required to be disclosed;
2. The methodology for identifying users of SDLT avoidance schemes.
We received 7 written responses from representative bodies and held a meeting in June 2009 with interest
This document summarises the points made during the consultation and provides examples of the types of
changes that will be made as a result.
Overall the reaction to the consultation was positive with most respondents agreeing that the proposals were
reasonable and sensible.
This Chapter, which summarises the comments received, is grouped into 2 parts. Part 1 deals with the
descriptions of schemes required to be disclosed; Part 2 looks at the method of identifying users of disclosed
Part 1: SDLT property schemes required to be disclosed – The SDLT Description
In the consultation document HMRC explained that the simplest way of extending DOTAS to bring residential
property schemes within its scope was to align the descriptions for residential property schemes with the
existing descriptions for commercial property schemes. DOTAS would then apply to schemes that wholly
• non-residential property with an aggregate value of at least £5 million; or
• residential property with an aggregate value of at least £ 1 million.
It would also apply to schemes that concern mixed non-residential and residential property where either:
• the value of the residential property is at least £1 million; or
• the value of all the property is at least £5 million.
But in order to restrict disclosures to schemes that are new and innovative the draft regulations contained a
“grandfathering” rule to remove the need to disclose schemes which are already in the market place and which
HMRC knows about and understands. Disclosure would not then be required for arrangements which are the
same, or substantially the same, as arrangements first made available for implementation before the new
regulations came into force.
Question 1: Do you agree that the proposed descriptions (which extend the existing commercial property
descriptions combined with a ‘grandfathering’ rule to exclude schemes first made available by any person
before the date the changes come into force) are the best means of extending DOTAS to SDLT residential
There was broad agreement that extending the existing descriptions to residential property was the right
approach and that the grandfathering rule would work in limiting the numbers of disclosures required.
However, concerns were expressed on how the grandfathering rule would work in practice. Most respondents
thought that it would be impossible for promoters to know which schemes had already been disclosed to HMRC
by other promoters. And even where it was known that a particular scheme had been disclosed the variations
and different combinations of steps involved could make it difficult to know whether a particular scheme should
be disclosed. This was likely to cause inconsistencies in disclosure.
There was a strong view that HMRC should continue to publish some sort of list of exemptions backed up by
comprehensive guidance to avoid over-disclosure. Several respondents thought that many routine transactions
may still be caught within the rules.
A number of respondents asked what the position was in relation to conveyancers. They were concerned that,
in many cases, they would not have sufficient knowledge to understand the complexities a scheme which would
make it extremely difficult to apply the various filters. Confirmation was sought on whether they would be
caught within the rules.
HMRC Response: HMRC remains of the view that the grandfathering rule is helpful and will cut down the
number of unwanted disclosures. Guidance will be given on ways in which to decide whether or not a scheme
is discloseable. Based on the comments received HMRC recognises that there is a clear preference to publish
a list of exemptions. However, it has to be recognised that there are inherent complexities with such a list
because of the need to consider the use of more than one item on the list, or combinations of only certain
aspects of those items, for multiple use. This means that any such list has to be short. Nevertheless HMRC
will retain the list alongside the grandfathering rule, keep it under review and amend as appropriate in the light
of disclosures received. The use of grandfathering rules and lists of exemptions already operates in other
areas of the regime and has proved to be effective.
HMRC has the option to withdraw a Scheme Reference Number (SRN) allocated to a disclosed scheme where
it decides that information about that scheme is no longer required. The duty on promoters and users to report
information about that scheme to HMRC no longer applies in these circumstances. Withdrawn SRNs are
published on the HMRC website.
Conveyancers who provide nothing more to clients than normal conveyancing services are not promoters as
defined in the Finance Act (promoters are persons who design or market schemes) and HMRC will make this
clear in the guidance.
Question 2: What schemes that are not tax avoidance might be required to be disclosed under the proposed
There were no significant problems identified other than those already raised in response to Question 1 above.
But there was a query about HMRC’s approach if new reliefs were introduced. Clarification was sought on
whether schemes which might seek to take advantage of that new relief were likely to be caught by disclosure.
HMRC Response: If any new reliefs were introduced HMRC would consider whether it was necessary to
update the list of exemptions.
Question 3: If you would prefer alternative descriptions, what are they and why are they preferable to the
No strong views were expressed in response to this question although some respondents considered that the
filters used in the direct tax regime would be better triggers for capturing new and innovative schemes. The
confidentiality and premium fee descriptions in regulations SI2006/1543 were given as examples.
HMRC Response: The filters used in the direct tax regime were discussed as options during the consultation
but it was thought that these, in the context of SDLT, were less certain than the proposal put forward. It was
considered that they added uncertainties and complexities without adding any further benefit.
Question 4: Do you agree that the current list of commercial property schemes exempted from disclosure
should be replaced by the proposed grandfathering rule?
The majority of respondents said that the current list of exemptions was complex and difficult to apply. Having
said that, they thought that although the grandfathering rule would be more straightforward to apply, there was
great merit in retaining and expanding the list of exemptions. This would go some way to resolving some of the
difficulties outlined in response to Question 1 above.
HMRC Response: See response to Question 1 above.
Question 5: Do you have any comments on the detail of the draft regulations in Part A of the Technical Note?
There were mixed views on the £1m and £5m thresholds. Some thought the £1m threshold for residential
property was too low and should be aligned with the £5m level for commercial property; others thought the £5m
threshold should be aligned to the £1m level. Either way, it was thought that there should be some sort of
mechanism to adjust these levels.
HMRC Response: HMRC has set the thresholds at a level that is proportionate to the mischief identified and
to keep the number of disclosures to a manageable number. There is still evidence of avoidance activity within
these limits despite the downturn in the housing market. The thresholds will be kept under review and adjusted
if this proves necessary.
Section 2: The methodology for identifying users of all SDLT Avoidance Schemes
The draft regulations in the Consultation Document proposed extending the existing Scheme Reference
Number (SRN) system to SDLT. HMRC’s view was that the SRN system was the simplest and most
proportionate way to identify scheme users and that the alternatives would prove to be significantly more
complex. The consultation also proposed the use of a stand-alone form for users of disclosed schemes to
report the SRN back to HMRC and explained why there were problems in relying on the SDLT1 Return.
Question 6: Do you agree that the SRN system is the best means of identifying users of disclosed SDLT
schemes? If not, what is your preferred means and why would it be preferable to the SRN system?
All respondents agreed that the proposal to use the existing SRN system was the most sensible way of
identifying users of SDLT avoidance schemes. They recognised the difficulties outlined in the Consultation
Document of using the SDLT1 Return to report the SRN back to HMRC.
Question 7: Do you agree that a stand-alone form is the best means for a user of a disclosed SDLT scheme to
report the SRN issued by HMRC? If not, what is your preferred means and why would it be preferable to a
Respondents agreed that using a stand alone form was the best alternative method to using the SDLT1 Return.
However, there was a suggestion that the SDLT1 Return could be used in circumstances where the user had
the SRN to hand and would be filing a Return. This would help reduce any unnecessary administrative burden.
One respondent asked us to consider including some free text space on the stand-alone form to allow the
taxpayer to provide additional information.
HMRC Response: As described in the consultation document the SDLT1 Return is not appropriate for
reporting back the SRN. Even where SDLT1 Return is required, the timing is not wholly compatible with the
timing for issuing SRNs. HMRC believes that it would be simpler to use the same reporting method (i.e. a
stand alone form) consistently.
Question 8: Do you agree that the draft regulations restrict the requirement to report a SRN to the person(s)
expecting to obtain a SDLT advantage?
There was general agreement that the regulations achieved their objective of capturing only those users who
expected to gain an SDLT advantage.
There were some other specific questions raised in relation to the position for partners and secondary SDLT
liabilities in Group Relief cases. These will be clarified in the regulations or guidance as appropriate.
Question 9: Do you agree with the information proposed for the new form in the Technical Note? Please
identify any items you believe are unnecessary, or any items not listed that ought to be included?
There were no significant objections to the type of information required on the new form although some
respondents sought clarification on certain requirements which were felt to be insufficiently precise. For
example who exactly is required to provide their name and address in regulation 17(a); what happens when
there are multiple title numbers and how does the title number tie in with the timing of the return in regulation
17(e); what exactly is meant by “price of property” in 17(i) and what standard of information is expected under
the “reasonably expected fetch” phrase in 17(f)? One responded suggested it would be helpful to include the
HMRC Response: Based on the responses received HMRC will be making changes to the regulations or
guidance, whichever is most appropriate.
Question 10: Do you agree with the proposed time limits for a scheme user to report the SRN etc to HMRC?
There was broad agreement that the time limits were reasonable, although one respondent thought that we
should extend the 30 day time limit to 60 days.
HMRC Response: The 30 day time limit is consistent with the time limits for the SDLT system more generally.
Question 11: Can you identify any potential problems resulting from ‘switching on’ the new co-promoter and
intermediary rules for SDLT on the date that the regulations come into force?
No potential problems were identified.
HMRC has carefully considered the responses received and will amend the legislation and guidance as
appropriate. Regulations will be made and laid before Parliament in the New Year with the intention of bringing
these into effect no later than 1st April 2010. An announcement will be made on the HMRC website before the
legislation comes into force. An updated Implementation Stage Impact Assessment and revised guidance will
be published alongside the revised regulations
HMRC will continue to engage with interested parties about future changes to the regime.
List of Stakeholders Consulted
Ernst & Young
British Property Federation
Chartered Institute of Taxation
Stamp Taxes Practitioners’ Group
Association of International Accountants
Association of Property Support Lawyers