By Daniel Hunter

A tax tribunal has ruled against a Stamp Duty Land Tax (SDLT) avoidance scheme, protecting £135 million in tax.

Project Blue Ltd now faces a bigger tax bill than it would have faced, had it not entered into the arrangement.

The SDLT sub-sale and alternative finance scheme had been notified by Clifford Chance under the Disclosure of Tax Avoidance Schemes (DOTAS) regulations, and attempted to eliminate all of the SDLT due on the purchase of Chelsea Barracks in London.

The First-tier Tribunal agreed with HM Revenue and Customs (HMRC) that £50 million was owed in SDLT and that without the scheme the purchasers would have only paid £38 million. The judgment affects 24 similar commercial cases and around 900 mass market residential cases, protecting £85 million.

Project Blue Ltd argued that the transactions had been carried out for commercial reasons and not to avoid tax. However, the tribunal ruled that the company had failed "to put forward evidence of all the factors that may have been taken into account" and failed to establish that tax avoidance was not a factor in their decision to proceed.

This important case is the first to test a targeted anti-avoidance rule in the SDLT legislation.

"This is another important success for HMRC at a tax tribunal. The message is clear that entering into a tax avoidance scheme can cost more than paying the original tax bill," David Gauke, Exchequer Secretary to the Treasury, said.

"Avoidance is complex, expensive and self defeating.

"We are cracking down on tax avoidance and evasion, with a £4.6 billion package."

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