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SDLT on de-enveloping transactions

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HMRC has recently published guidance on SDLT and de-enveloping transactions which is unhelpful. A substantial SDLT charge can arise where the company from which the property is to be extracted has debt owed to the shareholder or a third party. Following the tribunal decision in Project Blue, there is considerable uncertainty as to whether it is possible to avoid a charge to SDLT by capitalising such debt where it is owed to a shareholder, or funding the repayment of such debt by subscribing share capital, since FA 2003 ss 75A–75C may apply to impose a charge to SDLT on the amount of the debt capitalised or the amount of share capital subscribed. The guidance refers to the Project Blue decision but, since it is subject to further appeal, the uncertainty regarding the application of ss 75A–75C is likely to prevail for some time.

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