LTT And SDLT: Comparing Anti-Avoidance Provisions

Land transaction tax (LTT) has now been in operation for a year for land transactions in Wales. There is some anecdotal evidence that some advisers see the LTT regime and the operation of LTT by the Welsh Revenue Authority (WRA) as ripe for abuse by applying schemes from SDLT to LTT and charging property owners handsomely for the advice. However, the property owners may be in for a nasty shock when they discover the not so subtle differences between the avoidance legislation that applies to LTT and SDLT.


SDLT was introduced by FA 2003 and it was a sign of the times in 2003 that the provisions did not contain any anti-avoidance provisions of note. The first version of FA 2003 s 75A introducing notional transactions came into force in 2006 and was then replaced with the expanded ss 75A–75C in 2007 when deficiencies in the original drafting were discovered.

However, the notional transactions legislation in s 75A is complex and difficult to apply; just have a read of the judgments in Project Blue Ltd [2018] UKSC 30, which wound up in the Supreme Court in 2018 when the first contract was signed in April 2007.

The availability of sub-sale relief proved to be very fertile ground for promoters of SDLT schemes until the introduction of FA 2003 Sch 2A by FA 2013. Pre-2103 sub-sale schemes are now the subject of challenges by HMRC, although it appears from a practitioner’s point of view that it took an awfully long time for HMRC to cotton on to the sub-sale schemes and do anything about them, with the first HMRC spotlight on SDLT avoidance being published on 5 August 2010.

Finally, we have the general anti-abuse rule in FA 2013 Part 5 that applies to SDLT (amongst other taxes), which contains the double reasonableness test and consideration of whether the tax scheme was ‘abusive’ even if there was a tax saving. The ‘English GAAR’ provides some opportunity for schemes to escape counteraction, although the recent pronouncements from the GAAR Panel have come down on the side of HMRC, albeit when considering remuneration schemes.


When preparing the land transaction tax (LTT) legislation which is contained in the Land Transaction Tax and Anti-Avoidance of Devolved Taxes (Wales) Act 2017 (the ‘LTT Act’), the drafters were able to take advantage of the SDLT experience and were also mindful of the aim of the Welsh government to prevent tax avoidance.

The LTT Act contains two sets of anti-avoidance provisions:

  • a targeted anti-avoidance rule (TAAR) regarding the use of reliefs in s 31 (the ‘reliefs TAAR’); and
  • a general anti-avoidance rule in s 66.

The reliefs TAAR disapplies the claiming of any relief from LTT if the land transaction was a tax avoidance arrangement or forms part of arrangements which are tax avoidance arrangements. Transactions will fall foul of the provisions if the obtaining of a tax advantage is the main purpose or one of the main purposes of the buyer in entering into the transaction and the arrangement lacks genuine economic or commercial substance other than the obtaining of a tax advantage. Even without the availability of the revised SDLT sub-sale relief provisions which have been written into the LLT legislation, the reliefs TAAR gives the Welsh Revenue Authority (WRA) a ‘big stick’ with which to challenge (and prevent) sub-sale relief schemes.

The general anti-avoidance rule (the ‘Welsh GAAR’) is an even bigger stick for the WRA and is potentially much wider in scope than the English GAAR. The WRA guidance advises that taxpayers should exercise caution and expect the WRA to seek to proactively apply a wide interpretation of the Welsh GAAR, although it is not anticipated that the Welsh GAAR will be substantively wider than the English GAAR. We have the usual definition of tax avoidance arrangements: the obtaining of a tax advantage is the main purpose or one of the main purposes of entering into the transaction with the addition that the amount of tax at stake is relevant when considering what the main purpose of the transaction was all about.

A ‘tax advantage’ includes the avoidance or reduction of a charge to tax, claiming a relief or repayment (or increased relief or repayment) of tax, and the deferral or a payment of tax or the advancement of a repayment of tax. The tax avoidance arrangement must also be ‘artificial’, so that entering into the arrangement would not be a reasonable course of action. The legislation requires the questioning of whether there is any genuine economic or commercial substance to the arrangement, so looking at the reasons for structuring the transaction in a particular way. There is also a test that looks at whether the tax result was one that was anticipated at the time the Welsh tax legislation was passed.

There are several important distinctions between the Welsh GAAR and the English GAAR:

  • There is no ‘double reasonableness test’ in the Welsh GAAR, which means it is not possible for taxpayers to argue that the tax scheme was a reasonable course of action for a reasonable business person to take.
  • There is no Welsh GAAR panel to review tax schemes and provide an opinion to the WRA on the nature of the arrangements
  • There is no disclosure of tax avoidance scheme (DOTAS) regime for Welsh taxes. The WRA is reliant on cooperation with HMRC and reviewing the land transactions that take place in Wales (presumably comparing registrations at the Land Registry against LLT returns or where reliefs have been claimed on the LTT return).


Any article on avoidance cannot ignore the regulatory regime that applies to tax professionals and solicitors. Tax professionals who are members of the CIOT and the major accountancy bodies must take account of the rules of professional conduct in relation to taxation (PCRT). The general principle in relation to tax planning requires that members must not create, encourage or promote tax planning schemes or arrangements that intend to achieve results that are contrary to the clear intention of Parliament.

If you’d like further advice about this please don’t hesitate to contact a member of our Corporate Team.

This article was originally published in Tax Journal

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