We now have enough information to be able to answer the question of whether Angela Rayner will be subject to HMRC penalties, and how large those penalties will be. For the reasons below, in my view Ms Rayner will very likely receive penalties for a “careless” error of around 20%.
The background
On the basis of Angela Rayner’s statement on Wednesday, the report from Sir Laurie Magnus, and other publicly available sources, the background facts are as follows:
- A court created a trust in 2020 to help support the needs of her disabled child. The child was the sole beneficiary of the trust.
- At that time, Ms Rayner and her husband lived in a house in Ashton-under-Lyne, in Greater Manchester.
- Ms Rayner and her husband divorced in 2023. Probably as part of the divorce settlement, some of their interest in the house was then transferred to the trust, “to ensure [her disabled son] continued to have stability in the family home”. The trust may have paid cash to Ms Rayner and her husband in return for the interest in the house, but that’s not clear.
- The couple agreed a “nesting” arrangement in which they took turns living in the house, looking after their children.
- In 2025, Ms Rayner sold the rest of her interest in the Ashton-under-Lyne house to the trust for £162,500 cash. That may or may not have been part of the divorce settlement, but probably had to be approved by a court given the trust’s involvement in the transaction.
- Shortly after, Ms Rayner acquired a flat in Hove for £800,000.
- Ms Rayner obtained two sets of advice, from her conveyancer and a trusts lawyer, that the standard rate of stamp duty1Apologies to all tax advisers reading this, but I’m going to refer to stamp duty land tax as “stamp duty” throughout this article. applied to her Hove purchase, and not the higher rate for second homes. However both sets of advice stated that it was not expert tax advice. One made a suggestion that she should obtain specialist advice; the other made a recommendation.
- Ms Rayner however did not obtain specialist tax advice, and therefore paid stamp duty at the standard rate.
- Following recent press coverage, Ms Rayner instructed a leading tax counsel and received advice that “the application of complex deeming provisions which relate to my son’s trust gives rise to additional stamp duty liabilities”.
- This means that Ms Rayner should have paid the higher rate of stamp duty, an additional £40,000.
The law
The relevant stamp duty land tax legislation is as follows:
- Stamp duty land tax legislation is mostly contained in Finance Act 2003. The “higher rates for additional dwellings” (HRAD) rules are in Schedule 4ZA Finance Act 2003, which was created by Finance Act 2016.
- The higher rate was introduced at 3% but (from October 2024) is an additional 5% on each band of stamp duty (including the 0% band).
- The main rule, in paragraph 3 of Schedule 4ZA is that the higher rate applies if, at the end of the day you complete your purchase, you have a “major interest” in another dwelling worth £40k+, and you are not replacing your only or main residence.
- The definition of a “major interest” is in section 117 Finance Act 2003, and broadly covers any ownership interest in land, but not where someone is merely a trustee.
- There are rules for other cases in paragraphs 4 to 7 of Schedule 4ZA.
- If one person holds as trustee then, where it’s a bare trust or life settlement, it’s the beneficiary who is treated as owning it.
- But that creates an obvious avoidance opportunity. I could say I hold my family house on trust for my children, buy another property, and escape the higher rate charge.
- There is a specific rule in paragraph 12 to counter this. If minor children (i.e. under 18) are beneficiaries of a trust over property then the parents are treated as owning the property.
- That could create an unjust result if the trust was created as a result of a court order to protect a child with diminished capacity. So a specific exclusion (now in paragraph 12(1A)) was created in 2018 to prevent the higher rate stamp duty applying in this situation.
- The exclusion applies where a trustee is acting under powers conferred by a court appointment under the Mental Capacity Act 2005.
- The MCA 2005 allows a court to make an order appointing a “deputy” to make decisions on behalf of someone with diminished capacity. Often a deputy will hold property on that person’s behalf, as trustee.2Usually it’s adults rather than children who are the subject of such orders, as children’s affairs are already managed by their parents, but it’s not uncommon for orders to be made for children when they turn 16, so everything is in place in good time for when they turn 18.
This is all accurately and succinctly summarised in HMRC guidance.
How did the law apply?
When Ms Rayner acquired the Hove flat, it was the only property she owned. She was registered at the land registry as one of the owners of the Ashton-under-Lyne house, but she was just a trustee, with no economic/beneficial interest. So on the face of it the higher rate did not apply.
So the usual position would be that Ms Rayner’s purchase of the Hove flat would be taxed at the normal SDLT rate, meaning £27,500.3The applicable rates at the time meant the calculation was: 0% on the first £250k, and 5% on the rest. Assuming this was not a new lease, the ground rent does not affect the calculation..
However, Ms Rayner’s son was the beneficiary of a trust over the Ashton-under-Lyne house. That means that paragraph 12 deemed Ms Rayner to own the house.
Why didn’t the exclusion in paragraph 12(1A) apply? At this point we don’t know. Possibly something to do with the terms of the court order/trust that we’re not aware of. Possibly because the trust was in favour of her other children as well.4Paragraph 12 is applied separately to each child. So a child beneficiary who is within the paragraph 12(1A) exclusion doesn’t cause their parents to be deemed the owner of the property. But other child beneficiaries of the same property, who aren’t in the exclusion, will cause their parents to be deemed the owner. This is a potential “gotcha” for parents who try to protect all of their children, instead of just focussing the trust on the one child who needs MCA 2005 protections. Sir Laurie Magnus’s report says:
“I understand there are additional complexities, for example concerning the particular type of trust in question and the reason for which the trust was established. Taken together, it appears that – particularly in the context of the specialist type of trust in question – the interpretation of these rules is complex.“
So we should probably assume this wasn’t a simple ignorance of the existence of paragraph 12, but something more subtle.
Whatever the reason, the higher rate therefore applied, meaning £67,500.5The applicable rates at the time meant the calculation was: 5% on the first £250k, and 10% on the rest. So an additional £40,000 was due.
Will Ms Rayner face HMRC penalties?
I expect that she will.
The general rules for penalties are in Schedule 24 Finance Act 2007, and apply to most taxes, including stamp duty land tax.6There is an excellent summary of almost all procedural tax legislation and caselaw at procedure.tax – an amazing free resource created by Michael Firth KC.
There is plenty of caselaw on HMRC penalties, but I’m not aware of any where a taxpayer was advised to obtain specific tax advice, but didn’t. The following is my view based on applying the legislation, the principles in decided caselaw, and my experience of HMRC’s approach in practice.
There is no penalty for an innocent mistake, which was neither careless nor intentional (although the tax and interest remain due).
Penalties will, however, apply under paragraph 1 of Schedule 24 if a stamp duty return contains an understatement of tax which was “careless”. Paragraph 3 says that an inaccuracy is “careless” if it is due to failure by a taxpayer to take reasonable care.
The standard of “reasonable care” is the behaviour which a prudent and reasonable person in the position of the taxpayer would adopt. That means one takes account of the taxpayer’s particular abilities and circumstances.
When you instruct an adviser, and provide them with complete facts, you are entitled to rely on their advice, even if it turns out your adviser was careless (unless the advice was manifestly unreasonable or you failed to provide the adviser with complete facts). So if (for example) Ms Rayner did not read HMRC guidance herself, that does not make her “careless”.
I think it is reasonable for a layperson to trust a conveyancer’s advice on stamp duty (not least for the very practical reason that any other conclusion would cause grave difficulties in the property market), and a trust lawyer’s advice on tax involving trusts.7It’s is my view that neither is qualified to advise on non-straightforward SDLT questions, particularly those involving trusts, and I think most tax professionals would agree – but I don’t think it’s fair to assume that a prudent and reasonable layperson would share my view our on this. However your ability to rely on your conveyancer ends if the conveyancer advises you to speak to a specialist. That is what happened here.
My view is that a prudent and reasonable person in the position of Deputy Prime Minister would seek tax advice on a property transaction, particularly if they held legal title to another property, under a complex trust arrangement. My view is that, if the adviser told them they didn’t have expertise in the point, and suggested they receive specialist advice, a prudent and reasonable person would have obtained that advice.
As the First Tier Tribunal said in the Lithgow case:8Lithgow v HMRC TC2011/09646. See also Anderson [2016] UKFTT 335: “Nor would we expect such a taxpayer
to obtain another professional opinion again unless there is reason to do so, of which the taxpayer ought to reasonably be aware, such as that any qualification put upon the advice by the firm may limit its reliability”.
“[R]eliance upon properly provided professional advice, absent reason to believe that it is wrong, unreliable or hedged about with substantial caveats, will usually lead to the conclusion that a taxpayer has not been negligent if he has taken and acted upon that advice.“
Here there was a “substantial caveat”, and Ms Rayner did not act upon the advice to obtain specific tax input.
It follows that in my view Ms Rayner was almost certainly “careless”.9I say “almost” certainly because Ms Rayner has at least two counter-arguments. The first is to say that I’m wrong, and it was reasonable to rely on the two advisers, despite their caveats. Perhaps she could say she was used to lawyers adding caveats and thought it was just pointless boilerplate. I don’t agree with that. Alternatively, in principle Ms Rayner could avoid penalties if she could show that, even if she had obtained expert tax advice, they would still have got the answer wrong. We don’t know what the underlying complexity is, but this feels like a very challenging argument to run in circumstances where no tax advice was obtained at all (as opposed to cases where advice was obtained, but the taxpayer provided incomplete information). And Sir Laurie’s letter says that “if such expert tax advice had been received, as it later was, it would likely have advised her that a higher rate of SDLT was payable”. I’m also conscious that we haven’t seen the advice in question, and we are reliant upon Sir Laurie’s summary of what it said – he’s a very eminent and intelligent man, but not a lawyer.
What is the level of penalties?
The maximum penalty for “carelessness” is 30% of the lost tax.
Carelessness penalties are reduced, potentially to zero, if a taxpayer approaches HMRC with the error – in tax parlance, they made an “unprompted” disclosure. But in Ms Rayner’s case, her correction is realistically “prompted” – she only obtained proper tax advice after a week of press scrutiny, and HMRC were already aware of the issue.10Paragraph 9(1E)(2) says a disclosure is unprompted “if made at a time when the person making it has no reason to believe that HMRC have discovered or are about to discover the inaccuracy”. Once the press coverage began, it was likely inevitable that HMRC would discover the inaccuracy in Ms Rayner’s SDLT return. Ms Rayner had a “reason to believe” HMRC were “about to discover” the inaccuracy. So this is an unusual type of “prompted”, but it is in my view still “prompted”. That means that, under current HMRC practice, the level of penalties will usually be 15% to 30%.
I expect that, with reasonable cooperation from her advisers, the final level of penalties would be around 20% – so about £8,000.11If Ms Rayner’s advisers told HMRC immediately when the error was discovered then penalties could be reduced right down to 15% (for “telling“). Careless penalties can be suspended in some circumstances, but usually for taxes which are paid on an ongoing basis (e.g. VAT) and not typically for stamp duty land tax.
Disclosure
I’m a member of the Labour Party; I was a member of its senior disciplinary body (the National Constitutional Committee) but have stood down. I have no formal role in the Labour Party, and I advise policymakers in all parties. Generally that’s on “background”/unofficial: my one official role is that I’m a member of the SNP Scottish Government’s tax advisory group. I also participate in Government consultations, and speak to officials and occasionally politicians as part of those consultations (and have done so for many years, under previous Governments).
Thanks to T for their help with the stamp duty analysis, O for MCA 2005 background, and J for an SDLT correction after publication. And thanks to S for adding additional colour on the penalties caselaw.
Photo (c) British Broadcasting Corporation
- 1Apologies to all tax advisers reading this, but I’m going to refer to stamp duty land tax as “stamp duty” throughout this article.
- 2Usually it’s adults rather than children who are the subject of such orders, as children’s affairs are already managed by their parents, but it’s not uncommon for orders to be made for children when they turn 16, so everything is in place in good time for when they turn 18.
- 3The applicable rates at the time meant the calculation was: 0% on the first £250k, and 5% on the rest. Assuming this was not a new lease, the ground rent does not affect the calculation.
- 4Paragraph 12 is applied separately to each child. So a child beneficiary who is within the paragraph 12(1A) exclusion doesn’t cause their parents to be deemed the owner of the property. But other child beneficiaries of the same property, who aren’t in the exclusion, will cause their parents to be deemed the owner. This is a potential “gotcha” for parents who try to protect all of their children, instead of just focussing the trust on the one child who needs MCA 2005 protections.
- 5The applicable rates at the time meant the calculation was: 5% on the first £250k, and 10% on the rest.
- 6There is an excellent summary of almost all procedural tax legislation and caselaw at procedure.tax – an amazing free resource created by Michael Firth KC.
- 7It’s is my view that neither is qualified to advise on non-straightforward SDLT questions, particularly those involving trusts, and I think most tax professionals would agree – but I don’t think it’s fair to assume that a prudent and reasonable layperson would share my view our on this.
- 8Lithgow v HMRC TC2011/09646. See also Anderson [2016] UKFTT 335: “Nor would we expect such a taxpayer
to obtain another professional opinion again unless there is reason to do so, of which the taxpayer ought to reasonably be aware, such as that any qualification put upon the advice by the firm may limit its reliability”. - 9I say “almost” certainly because Ms Rayner has at least two counter-arguments. The first is to say that I’m wrong, and it was reasonable to rely on the two advisers, despite their caveats. Perhaps she could say she was used to lawyers adding caveats and thought it was just pointless boilerplate. I don’t agree with that. Alternatively, in principle Ms Rayner could avoid penalties if she could show that, even if she had obtained expert tax advice, they would still have got the answer wrong. We don’t know what the underlying complexity is, but this feels like a very challenging argument to run in circumstances where no tax advice was obtained at all (as opposed to cases where advice was obtained, but the taxpayer provided incomplete information). And Sir Laurie’s letter says that “if such expert tax advice had been received, as it later was, it would likely have advised her that a higher rate of SDLT was payable”. I’m also conscious that we haven’t seen the advice in question, and we are reliant upon Sir Laurie’s summary of what it said – he’s a very eminent and intelligent man, but not a lawyer.
- 10Paragraph 9(1E)(2) says a disclosure is unprompted “if made at a time when the person making it has no reason to believe that HMRC have discovered or are about to discover the inaccuracy”. Once the press coverage began, it was likely inevitable that HMRC would discover the inaccuracy in Ms Rayner’s SDLT return. Ms Rayner had a “reason to believe” HMRC were “about to discover” the inaccuracy. So this is an unusual type of “prompted”, but it is in my view still “prompted”.
- 11If Ms Rayner’s advisers told HMRC immediately when the error was discovered then penalties could be reduced right down to 15% (for “telling“). Careless penalties can be suspended in some circumstances, but usually for taxes which are paid on an ongoing basis (e.g. VAT) and not typically for stamp duty land tax.
39 responses to “Why Angela Rayner is likely to pay £8,000 in stamp duty penalties”
Dan, your analysis is flawed (like the investigation report) per my comments here and I would be happy to defend AR pro bono re penalties.
https://www.accountingweb.co.uk/any-answers/ms-a-rayner-and-the-ps40k-tax-advantage
Justin, could you please clarify what part of Dan’s analysis you think is flawed. Is it the SDLT technical analysis? If so, I am confused since his analysis seems to be in line with your comments on the link that you provided, which is that it almost certainly the para 12 deeming provision that causes the problem (and which, for what it is worth, I think is spot on). Or is it his analysis of the culpability and penalties position? This is not, by any means my specialist area but I can see room for different opinions on this. On the one hand, this is a complex technical point on which even an SDLT specialist would probably need to double check first. On the other hand, we are told that she was advised to seek a specialist opinion. Also, even if she could not be expected to have an understanding of the technical position, she would have grasped from when the trust was set up that they are fiendishly complicated, especially when it comes to tax, which should have led her to follow that advice and seek a specialist view. Hence, I am inclined to think that it does shade into carelessness, although any penalty should be at the bottom end of the range.
Incidentally, a further thought has occurred to me since. If, as soon as she became aware of the error, she had filed an amended SDLT return (and she was in plenty of time to do so) would this have avoided any exposure to penalties? As I said, this is not my area so I don’t know the answer.
Robert, with respect, I assume you have not properly read my comments in the above link, as I explained things very clearly there. Try reading my comments again there and also in this other link: https://www.accountingweb.co.uk/community/blogs/philip-fisher/there-but-for-the-grace-of-the-media
I must say that I don’t see why the exemption in para 3(5) sch 4ZA doesn’t apply. In the three years prior to the purchase of the Hove dwelling she sold her previous main residence (to the trust) such that she no longer had a major interest in the dwelling. There is an deeming provision in para 10(3) but I don’t think that it’s strong enough to prevent the exemption applying. I haven’t spent a huge amount of time looking at this, but my initial reaction is that I don’t think there’s a HRAD liability – which if correct would be hilarious given all the pearl clutching going on about this.
I don’t think this is right. It is quite true that, in the 3 years prior to the acquisition of the Hove apartment, she sold her remaining interest in the Ashton house to the trust. However, as has been established, para 12 deems her to hold an interest in the Ashton house. Para 3(6)(ba) denies replacement of main residence relief where, immediately after the previous disposal, the purchaser still has a major interest in the sold dwelling. The deeming rule means that she did (and still does) have such an interest. Hence replacement of main residence relief cannot apply.
Incidentally, even if this were not the case the relief would only apply if the Hove flat were purchased with the intention of it becoming her main residence. This is another area where CGT and SDLT diverge. She can probably make a CGT main residence election for the Hove flat (assuming she spends at least some time there) but such an election cuts no ice in the SDLT world. The test for main residence for SDLT purposes is a purely factual one. Given that it appears that she has said that the Ashton house will continue to be her main residence, it does not appear likely that the Hove flat would meet the factual test. This is by way of an aside since, as stated, para 3(6)(ba) kills it anyway.
Absolutely my point, and I am a layperson who had to pay the extra rate of SDLT when I purchased a buy-to-let… I found it unbelievable that she continued to live in Ashton but didn’t realise she had to pay more SDLT for Hove! If she failed to take the specialist advice she was advised to take, to my mind that totally smacks of a desire to avoid tax, whatever the circumstances of this trust!! All the more reason to get it right, and she is in government!! What hope for us….. by the way, thanks to all for such a good explanatory post
Slightly different question, if I ‘bought’ a property in my partner’s name and avoided paying the additional SDLT as they didn’t already own a property but I did, does it matter where the money came from for the purchase? If it was deemed that the money was mine, could this open up the possibility of a surcharge because the purchase was made by me in all but name?
Can anyone explain precisely why AR will not be entitled to a refund of the additional £40000 tax when her son, the beneficiary of the Trust attains the age of majority? If the 3 year rule legitimately applies, then Angela Rayner will be completely exonerated, surely?
the way the deeming rule works, she was deemed to own the Ashton-under-Lyne house at the point she bought the Hove flat. When the child beneficiaries of the trust are all 18 then the deeming will cease. But there’s no deemed disposal, or anything else that would trigger the replacement dwelling rules.
For capital gains purposes when a person becomes absolutely entitled the trustees are treated as disposing of all of the settled assets to which the beneficiary has become entitled. Surely this will also apply in the case of SDLT.
I don’t think that is the case. The fact that there is a deemed disposal for CGT purposes does not mean that the same applies for SDLT. I agree with Dan’s analysis. There is no deemed disposal when the beneficiary reaches 18 and, without a disposal, the replacement of main residence rule cannot apply. This may seem unfair but it is the way the legislation is drafted.
Does anyone know if the trust paid SDLT when the Ashton-under-Lyme property was transferred into it? If it did, then it seems deeply unfair for Ms Rayner to be deemed the owner of the A-u-L property now but for the transfer to have attracted SDLT at the time of the transfer (presumably as a result of a deemed ownership change)? If the trust didn’t pay SDLT as a result of the transfer whre Ms Rayner thought ownership had changed, then if I was in Ms Rayner’s shoes I would have been extra careful when paying the reduced rate for the new flat as something doesn’t pass the logic test for me.
Perhaps you did not consider the final part of this paragraph in the HMRC’s guidance? : Any entitlement to capital proceeds from the sale of the property, to income or to occupy the property would likely mean that they do have a beneficial interest.
Of course we do not know the full details of the trust but it would seem to me unlikely that any parent of a disabled child would accept terms of a trust which gave them no right to occupy the house with that child should the need arise. Indeed, Ms Rayner has openly stated that it remains her primary residence and that she will be living there regularly. Therefore, I find it difficult to understand in such circumstances that an individual could successfully claim to have no beneficial interest in the property according to the rules.
it’s a good point, but I’m going off the reference to deeming in Ms Rayner’s statement.
How old is the child named in the trust? I’ve read 17. If so, that would mean that Ms Rayner could have waited a while till his majority then this section of “complex” law about the trust would not have applied.
that indeed seems correct. Getting appropriate tax advice could well have saved her £40k. But – and here’s an interesting question – would that be tax avoidance?
Is it not the case that Rayner will be entitled to a full refund of any higher rate SDLT paid when the situation with the Ashton property is resolved? This could happen in a few months when her son becomes an adult.
Purchasers have 3 years to sell their original property to qualify for a refund.
That’s true for the normal case where you own/live in one property, buy a replacement property, and then sell the first property within three years. But the way the deeming rule works means that (at least on my reading) the three year rule won’t apply here.
Why would deeming still apply when her son becomes a mentally competent adult?
Why didn’t the HMRC’s internal systems flag this up when she submitted the original return for the Hove flat?
I assume they had her previous stamp duty returns, information about the trust and her tax returns and addresses.
As a constituency MP in another part of the country to her new property, wouldn’t it have raised questions with anyone working in the HMRC that she might have two properties on a basic common sense level?
We are always being told about joined up digital systems and AI being used to reduce fraud and error in government but there seems to have been no joined up thinking in this department when much of this information must have been with them.
This does seem to have been a mistake that has cost her dearly and surely HMRC could have been more proactive in alerting her to the error in the first place.
It raises questions about how many honest, if careless, mistakes could be flagged earlier and how much tax owed is being missed and not flagged up by their internal system.
I agree with you on prompted, careless as the behaviour. But I don’t think you have properly applied the quality of disclosure for reduction.
Prompted careless disclosure gives penalty range 15-30%.
Per CH82430 (HMRC’s compliance handbook, available online) the reduction is based on Telling, Helping and Giving. This isn’t a judgement on the behaviour that caused the inaccurate return (that has already been covered by reaching careless, prompted), but on the disclosure that is correcting it.
On what is in the media if she fully discloses to HMRC I would expect the fully reduction – The public information include what happened, how it happened and fully quantifies the loss to the revenue. There is no more that could be disclosed making disclosure as full and frank as possible thus the full reduction.
I realise it is not the main subject of the article (!) but I am intrigued that “major interest” in property is in fact defined as, effectively, any interest in property rather than what one might expect it to be eg a >25% stake in a property. Why not just use “an interest” or a “relevant interest”. Am I missing something?
it is a deeply crap term. “Long term interest” would be better (because the big exclusion is leases with under 7 years to run)
My gut says this could be unprompted. There is a difference between HMRC being aware/risking something, and any outward compliance activity to the taxpayer. This has all happened within a week and we all know HMRC doesn’t move that fast. Just because it’s in the press doesn’t necessarily mean the taxpayer is under investigation. Therefore she could have made an unprompted disclosure this week. It’s a very hard argument for HMRC to say the press coverage means it is prompted.
it’s an unusual situation, but looking at the first paragraph of HMRC’s guidance:
“A disclosure is unprompted if it is made at a time when the person making it has no reason to believe that HMRC have discovered or are about to discover the inaccuracy, under-assessment, failure to notify, deliberate withholding of information or wrongdoing. Otherwise it is prompted.”
It’s reasonably clear HMRC were “about to discover the inaccuracy”, even if there wasn’t a current investigation.
I completely see your point and I suppose it depends on the specifics and timings. She could have made a disclosure earlier in the week well before all the details came out. Wouldn’t be the first to secure favourable terms before then releasing information to the wider public. I’d like to think a good advisor should argue this or if it is deemed prompted then argue hard for suspension conditions. Although I can’t see the taxpayer having an appetite for further stamp duty transactions anytime soon…!
I tend to agree that it is unprompted.
I think that there is a difference between something being on tiktok vs HMRC being about to “discover” something.
You mention HMRC’s guidance but this just comes from para 12(3)(a) Schedule 41 Finance Act 2008. This uses the word “discover” and so comes with a lot of case law baggage. I fully admit I don’t follow case law about discovery and penalties.
I also wonder whether this is a situation where the deemining rules do an asymetrical job? If someone owns their own home, buys another (paying the surcharge) and then sells the original within three years then they get the surcharge back.
But if they are only deemed to own the home and the deeming stops within three years (e.g. because all the beneficiaries are now 18+) there is no actual land transaction and so presumably there is no refund? Or would the courts stretch the deeming rule to include a deemed land transcation / disposal when the deemed home no longer is deemed to be the purchaser’s?
Having dealt with these penalties for HMRC for 10 years I would agree.
Dan’s response about the timing of any disclosure is being unduly harsh.
For example rental property cases, even though HMRC are running a property campaign and are aware of many rental properties which have not been declared, unless you get a letter from them, if you firstly voluntarily declare the property you will be treated as unprompted.
I would add if it wasn’t for the media publicity it would have been very unlikely HMRC would have picked this up (unless they had a tip off).
Two other points.
1. This whole article should be treated as speculation, lets not forget HMRC are duty bound to respect Ms Raynor’s confidentiality and therefore how it is dealt with is not for us to know.
2. Obviously that HMRC treat Ms Raynor as if she was any other taxpayer.
A bit more on Sch 24 as it is particularly relevant here – as indeed it was in Zahawi. Taking reasonable care in the context of this scenario involves “seeking advice from a person the taxpayer reasonably believes is competent to advise on the matter, presenting the adviser with the full facts and acting on their advice”. The advice that Ms Rayner received was that neither source felt qualified to advise on the specifics. So following their advice would not count as ‘reasonable care’.
I agree, Dan with your analysis – Ms Rayner was ‘careless’ within the meaning of tax law on inaccuracies in a return. A return for which she was responsible, even though submitted by her agent (the conveyancing solicitors) contained an inaccuracy and she had not exercised reasonable care to avoid such an inaccuracy. She was clearly transparent about the existence of the trust (which I initially did not realise) but failed to take very specialist advice about a complex area of law despite being warned about this.
I’ve been wondering who might have alerted the Telegraph to this issue. I can’t understand who would have access to details of the amount of stamp duty paid unless they were either HMRC or one of the legal entities involved in this transaction. Is there any way that a journalist might have accessed the details without some ‘insider’ knowledge?
Dan, The Times has suggested there were two trusts.
one which received the compensation award and it was perhaps this one was court “protected”.
The second (empty of cash) Trust was perhaps related to the divorce, into which they simply placed 50% of the House for the benefit of their children. I presume the first trust, presumably cash rich, was the purchaser of the 25% and could use 12(1A) but The second trust probably was able to do so, and it was this that created the deemed ownership?
that is possible – it’s all a bit unclear.
Thanks for posting this. Very helpful.
It’s worth taking a look at the online HMRC stamp duty calculator, which was used by her conveyancers. Absolutely nothing there to flag up any potential issues with trusts, and one very badly worded question: “Will the purchase of the property result in owning two or more properties?”
If …
If Rayner had perchance used the HMRC questionnaire to determine the SDLT due, and answered it honestly, and it said no additional SDLT was due, then she would have made an honest mistake, guided by HMRC. No penalty due. Pay the 40k. And no need to resign.
I don’t agree – as a trustee of another property, if she’d answers the “do you own another property?” question by clicking “no”, without taking advice, then that would IMO be careless.
I don’t have your expertise, but she may be spammed to death with “you don’t own your house, the trust owns the house ads”. And as I understand it, the bit that caught her was being a parent.
I suspect the calculator is going to be updated soonish with a bit more guidance here. A single question of “are you or your children beneficiaries of a trust that holds property” would have flagged issues.
which ads????
A disabled trust under s89 IHTA will normally include siblings in the event that the main beneficiary dies. The restriction that income and capital can only benefit the disabled person only applies during the person’s lifetime. After that anyone specified as a beneficiary but parents would normally exclude themselves from benefit.