Can HMRC still pursue SDLT and interest years later after a failed avoidance scheme?

Introduction

Readers often search for this issue after receiving an unexpected HMRC letter many years after buying a property. A common pattern is that the buyer was placed into a stamp duty land tax avoidance arrangement by a solicitor or adviser, paid little or no SDLT at the time, and then later faced a discovery assessment for the unpaid tax plus interest.

The difficult questions are usually these: does an old appeal still help, does HMRC lose the right to charge interest because it delayed matters, and is there any realistic chance of defeating the assessment? In cases involving older SDLT avoidance structures, the answer is often unfavourable to the taxpayer.

The Question

A buyer purchased a residential property many years ago. The SDLT that would ordinarily have been due was substantial, but the conveyancing solicitor placed the buyer into a marketed SDLT relief or avoidance scheme so that no SDLT was paid on completion. A significant fee was paid to the solicitor for setting up the arrangement and supposedly making disclosure to HMRC.

Several years later, HMRC issued a discovery assessment for the full SDLT plus interest. An appeal was lodged at the time, but then there was a very long period with little or no apparent progress. HMRC has now written again, saying the tax remains due and that further interest has accrued over the intervening years.

The buyer wants to know:

• whether the appeal is likely to succeed;
• whether similar scheme users have successfully resisted HMRC;
• whether HMRC can continue charging interest despite a long period of inactivity; and
• what practical steps should now be taken.

Nick’s Explanation

Nick’s initial view was cautious. He explained that he was not especially familiar with the exact mechanics of this particular scheme and described the situation as looking “fairly intractable”. He then referred the matter for a specialist view from a consultant with experience of SDLT avoidance schemes.

The specialist response was direct: “No prospects of success given the Court of appeal decision in Oisin Fanning v HMRC UT/2020/0102, he will need to settle.”

That is the key practical message from the exchange. While every case depends on its own facts and procedural history, the expert view given was that, in light of the case law, a challenge to HMRC’s position was unlikely to succeed.

The Law

SDLT is charged under the Finance Act 2003. The purchaser is generally responsible for filing the SDLT return and paying the tax due on a land transaction.

Where too little SDLT has been paid, HMRC may in certain circumstances issue a discovery assessment. The detailed rules are found in Schedule 10 to the Finance Act 2003. Broadly, HMRC must show that there has been an insufficiency of tax and that the statutory conditions for making a discovery assessment are met.

In older SDLT scheme cases, taxpayers often argued that HMRC had enough information from the original return or from separate disclosure material, so a later discovery assessment should not have been made. Those arguments have been tested in litigation, including Oisin Fanning v HMRC UT/2020/0102, which is the authority specifically identified in the expert response.

Interest on unpaid SDLT is generally charged on a statutory basis. As a rule, interest runs because tax was unpaid from the due date, not because HMRC acted quickly or slowly. That means delay by HMRC does not automatically stop interest from accruing. In many tax contexts, interest is compensatory rather than punitive: it reflects the time value of money on tax that should have been paid earlier.

If a taxpayer argues that a property was uninhabitable or not suitable for use as a dwelling, that is a separate issue under SDLT dwelling rules and not a general answer to a failed avoidance scheme. In any event, the threshold for showing that a property was not suitable for use as a dwelling is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

Analysis

The starting point is that the buyer entered into a marketed SDLT scheme and paid no SDLT when the property was bought. HMRC later assessed the tax that would ordinarily have been payable. In practical terms, that already places the buyer in a difficult position, because courts have generally been unsympathetic to artificial SDLT arrangements.

The next issue is the supposed disclosure. Many scheme users were told that a disclosure letter or explanatory note protected them from later HMRC action. That is not necessarily correct. First, there may be a factual problem about whether HMRC actually received the disclosure. Second, even if HMRC did receive something, the content may not have been enough to prevent a valid discovery assessment.

That appears to be exactly the problem here. HMRC’s position is that the Stamp Office did not receive the disclosure letter at the relevant time and that, even if it had, it would not have prevented the assessment. If the original solicitor has since gone into liquidation and there is no proof of posting, delivery, or file record, the evidential position becomes weaker.

The existence of an appeal from years ago does not by itself mean the underlying SDLT is not payable. It simply means the dispute may still need to be resolved procedurally. If HMRC did not formally close matters for a long time, the buyer may still be entitled to ask for clarification of the appeal status and the procedural basis on which HMRC is now demanding payment. But that is not the same as having a strong substantive defence.

As for the merits, the specialist view relied on Oisin Fanning v HMRC UT/2020/0102. Although the exact structure of each scheme can differ, the point of citing that authority is that the courts have upheld HMRC in closely related SDLT avoidance disputes. If the legal reasoning in that case applies to the arrangement used here, the buyer’s prospects are poor.

The question about interest is understandably frustrating. It feels unfair for HMRC to remain quiet for years and then add a large amount of interest. However, statutory tax interest usually continues to run while the tax remains unpaid, unless there is a specific legal basis to displace it. Mere delay by HMRC will not usually extinguish interest. There may be limited scope in some circumstances to challenge administrative handling or to seek a pragmatic settlement discussion, but that is different from saying the interest was unlawfully charged.

So, step by step:

1. The SDLT was not paid at the time of purchase because of a marketed scheme.
2. HMRC later issued a discovery assessment for the unpaid tax.
3. The buyer’s best argument appears to have been that HMRC had been properly informed, but that argument is fact-sensitive and may fail both on evidence and on law.
4. The expert view is that the relevant case law leaves no realistic prospects of success.
5. Interest is likely to continue to be legally chargeable despite HMRC’s delay.

Outcome

The practical conclusion is that a buyer in this position is unlikely to defeat HMRC simply by relying on the fact that a disclosure letter was supposedly sent, or on the fact that HMRC allowed the matter to drift for years.

Where the arrangement is materially similar to the SDLT scheme litigation already decided in HMRC’s favour, the realistic outcome is usually that the SDLT and statutory interest will have to be paid, subject to checking the exact procedural status of the appeal and the accuracy of HMRC’s figures.

Practical Steps

If you are in this position, the sensible next steps are:

• obtain the full HMRC file if possible, including the discovery assessment, appeal correspondence, and the latest statement of tax and interest;
• confirm whether the appeal is still formally open and, if so, at what stage;
• ask HMRC to explain precisely why it says the original disclosure was not received or was insufficient;
• gather any surviving evidence of disclosure, such as letters, enclosures, proof of posting, file notes, or completion documents;
• check whether the interest calculation is arithmetically correct, even if the legal basis for charging interest is likely to stand;
• review whether the arrangement used is materially the same as the scheme considered in Oisin Fanning v HMRC UT/2020/0102;
• if the merits are poor, consider opening settlement discussions promptly to prevent further interest from accruing; and
• if any separate argument is being considered about the property being uninhabitable or not suitable for use as a dwelling, assess that carefully against the now high threshold confirmed in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

Conclusion

In older SDLT avoidance scheme cases, a long delay by HMRC does not usually create a winning defence. If the arrangement falls within the reasoning of the decided authorities, the chances of overturning the assessment are low, and statutory interest will usually continue to run until the liability is settled.

Legal References Used

• Finance Act 2003
• Finance Act 2003, Schedule 10
• Oisin Fanning v HMRC UT/2020/0102
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

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