HM Treasury has published a consultation paper (the consultation paper) on the reform of the tax treatment of residential property transactions effected through a special purpose vehicle (SPV).

A UK property transferred directly to a buyer may be subject to a charge to Stamp Duty Land Tax (SDLT). However, if the property is owned by a company (or other vehicle), the buyer could acquire the company, rather than take a direct transfer of the land. A correctly structured transaction involving an SPV can avoid the high rates of SDLT that would be paid on a transfer of the land itself.

The consultation paper seeks views on "fairer" ways of taxing transactions involving SPVs, to make the tax treatment closer to that of similar land transactions.

The consultation also asks for comments on a possible extension of the SDLT disclosure rules to include residential property worth £1 million or more.

While the consultation paper refers to residential property, the effects of the changes could impact upon companies that own properties.

Responses to the consultation should be submitted by 8 February 2008.

NOTE ADDED 08/01/08: For additional analysis, see PLC Tax, Legal update, SDLT anti-avoidance and disclosure: HMRC consultation relating to high value residential property.