BMW has transferred the assets of Land Rover to a Jersey-based company in a bid to avoid a stamp duty bill which could be as high as £70m.
The German motor manufacturer, which has signed a memorandum of understanding with Ford over the sale of Land Rover at the same time as agreeing to sell Rover to Alchemy, is liable to a 4 per cent charge on a sale price that is expected to be about £1.8bn.
By creating a new company based in the Channel Islands, BMW intends to complete the transaction without incurring the liability.
But the plan could run into opposition from the Inland Revenue. Although there is nothing illegal about the transfer, BMW can only avoid the tax if the assets are moved before arrangements for a sale are in place. The Inland Revenue may argue that the memorandum signed with Ford constitutes just such "arrangements".
Kevin Griffin, a member of Ernst & Young's stamp duty group, said: "By putting ownership of assets into a separate company, BMW is liable to just an eighth of the stamp duty it would have paid, if that.
"A key requirement is that the transfer should happen before they have gone too far down the track with a potential purchaser," he added.
Patrick Cannon, a director of Arthur Andersen, said: "It seems that BMW is taking full advantage of the planning opportunities which still exist to save stamp duty. Given the proximity of timing between the transfers to Jersey and the ultimate sale, it is a moot point as to whether specific anti-avoidance legislation or measures will prevent this planning from succeeding."
A spokesman for BMW confirmed that the transfer had taken place, describing it as a "normal" transaction when a business like this is being sold.
It is understood to have taken place about a fortnight ago, after the agreement with Ford had been reached. Although the sale of Land Rover has yet to be finalised, it is considered unlikely that a rival bidder will come forward now that General Motors has ruled itself out. But BMW may argue that the transfer has taken place early enough to avoid stamp duty, since the deal is not yet complete. The Chancellor caused widespread surprise in the Budget when he failed to announce long-awaited plans to close loopholes that have allowed companies routinely to avoid stamp duty when selling subsidiary companies.
However, companies have grown accustomed to moving deals abroad or simply doing away with documentation in order to circumvent the duty. In the process, billions of pounds of tax revenue are denied to the nation's coffers.
Ford is eager to acquire Land Rover to put alongside its other premium marques, Aston Martin and Jaguar.
Last year, global sales of Land Rover were 178,000, 39,000 of which took place in the UK. It was the agreement with Ford over Land Rover that has allowed BMW to prepare the sale of Rover itself.Reuse content