Loophole favouring rich under scrutiny in UK

Britain plans to plug a loophole that helped super-rich like steel tycoon Lakshmi Mittal and Saif Gadaffi — son of the Libyan dictator Muammar Gaddafi — avoid paying thousands of pounds in stamp duty on their homes, a media report said today.

According to the Sunday Times, the loophole involves registering the property in the names of companies rather than people.

Bob Geldof, the Live Aid organiser, and Zac Goldsmith, the Tory MP who prides himself on his green credentials, are among those who have followed this route. A home registered in the name of a company allows the owner to simply sell the shares in the company rather than the property itself. The company shares attract 0.5 per cent in stamp duty rather than the five per cent levy to be imposed next month on houses costing more than £1 million and sold the traditional way.

Under the loophole, a house worth £20 million attracts a stamp duty of £100,000 for the next owner rather than £1 million. This means the current owner can offer it for a lower price or share the savings with the purchaser. Tax authorities believe the avoidance scheme is already being used on many expensive homes and cost the exchequer £40 million a year in lost revenue.