First Edition 2014 by Christopher Cox and Richard Woolich

Transcription

1 Stamp Duty Land Tax

2 First Edition 2014 by Christopher Cox and Richard Woolich Published in 2014 by Sweet & Maxwell, Friars House, 160 Blackfriars Road, London, SE1 8EZ part of Thomson Reuters (Professional) UK Limited (Registered in England & Wales, Company No Registered Office and address for service: Aldgate House, 33 Aldgate High Street, London EC3N 1DL). Sweet & Maxwell is a registered trademark of Thomson Reuters (Professional) UK Limited. For further information on our products and services, visit Typeset by Letterpart Limited, Caterham on the Hill, Surrey, CR3 5XL. Printed and bound in Great Britain by CPI Group (UK) Ltd, Croydon, CR0 4YY No natural forests were destroyed to make this product; only farmed timber was used and re-planted. A CIP catalogue record of this book is available for the British Library. ISBN: Thomson Reuters and the Thomson Reuters logo are trademarks of Thomson Reuters. Crown copyright material is reproduced with the permission of the Controller of HMSO and the Queen s Printer for Scotland. All rights reserved. No part of this publication may be reproduced, or transmitted in any form, or by any means, or stored in any retrieval system of any nature, without prior written permission, except for permitted fair dealing under the Copyright, Designs and Patents Act 1988, or in accordance with the terms of a licence issued by the Copyright Licensing Agency in respect of photocopying and/or reprographic reproduction. Application for permission for other use of copyright material, including permission to reproduce extracts in other published works, shall be made to the publishers. Full acknowledgement of the author, publisher and source must be given Thomson Reuters (Professional) UK Limited

3 Introduction Stamp duty land tax is almost eleven years old and there has been virtually no raising of the thresholds to adjust for inflation and it is a major source of revenue for the Government. And it has become more complicated. For example, in recent years we have had new sub-sale rules, the 15 per cent rate, relief for multiple purchases of dwellings and the general anti-abuse rule ( GAAR ). We have tried to write a clear explanation of the tax in its present form which we hope will be useful to anyone involved in commercial or residential property, especially tax and property practitioners. We want to thank John Dunlop and Matthew Spencer of DAC Beachcroft s tax department for their valuable suggestions and encouragement and Georgina Cox for her assistance with word processing. Notes to the reader The law is stated as at July 17, 2014, the date of Royal Assent to the Finance Act Statutory references in the footnotes are to the Finance Act 2003 as amended, unless another Act is stated. The book does not deal with the new tax, the land and buildings transaction tax, which is about to replace SDLT on Scottish land, and because this replacement is imminent it does not deal with the (comparatively few) special SDLT rules relating to Scottish land. Whenever a third person singular pronoun is needed and the antecedent could be either male or female (or generally a legal person) we have used he, him etc. ( when the purchaser has completed he must within 30 days deliver a land transaction return ). We hope that readers are not offended by this. It avoids v

4 Stamp Duty Land Tax the tedious continual use of he or she, the irritating s/he and the ugly and ungrammatical they ( when the purchaser has completed they must ). Christopher Cox DAC Beachcroft LLP Richard Woolich DLA Piper UK LLP vi

5 Contents Introduction Table of Cases Table of Statutes Table of Statutory Instruments PAGE v xvii xxiii xxxvii 1 Outline and background 2 Structure of SDLT Outline of SDLT 1 Background to SDLT 3 The yield from and effect of SDLT 7 The SDLT legislation and how it is amended 9 A tax on acquisitions. Chargeable interests 11 Acquisition. Vendor and Purchaser 14 The effective date: s Acquisition without preceding contract 16 Contract to be followed by completion document: s Substantial performance: receipt of rents and profits: s.44(6)(a) 18 Substantial performance: payment of consideration: s.44(5)(b), (7) 18 Substantial performance: taking possession: s.44(5)(a), (6) 20 Substantial performance: procedure: s.44(8), (9) 22 Price apportionment: Sch.4 para.4 23 Fixtures and chattels 24 Fixtures and chattels: what the parties should do 26 Purchase of a business as a going concern. Goodwill 27 Goodwill: what purchasers should do 30 Quasi-purchases: s.44a 30 Joint purchasers: s.103, Sch.16 para.3 32 vii

6 Stamp Duty Land Tax 3 The Rates Interaction with other taxes 33 The rates: s What counts as residential property: s Institutional accommodation: s.116(2) (5) 39 The six-or-more dwellings rule: s.116(7) 40 Acquisitions of more than one dwelling: decoupling and averaging: Sch.6B 41 Decoupling and averaging: the clawback: Sch.6B, para.6 44 Linkage: ss.55(4), 108, Sch.5 para.2(5) 45 Linkage: procedure: s.81a 48 The 15 per cent rate for higher value dwellings bought by companies: Sch.4A 49 The 15 per cent rate: the exceptions: Sch.4A paras 5 5F 51 The 15 per cent rate: the exceptions clawback: Sch.4A paras 5G 5K 54 4 Chargeable consideration: cash The basic rule 57 Simple delayed payment 58 Contingent, uncertain or unascertained consideration: s Contingent, uncertain or unascertained consideration: later adjustment: s Contingent or uncertain consideration: postponement of tax: s.90 and SDLT (Administration) Regulations 2003 rr Value added tax: Sch.4 para.2 64 Value added tax: transfers of businesses as going concerns 65 5 Chargeable consideration: debts Acquisition in satisfaction of debt: Sch.4 para.8(1)(a) 67 Acquisition with assumption of debt: Sch.4 para.8(1)(b) 68 Transfer subject to secured debt: Sch.4 para.8(1) (1C) 68 Joint names cases: Sch.4 para.8(1b), (1C) 70 viii

7 Contents 6 Chargeable consideration: in kind Consideration in kind 73 Land exchanged for non-land asset: Sch.4 para.7 73 Land exchanged for land: s.47 and Sch.4 para.5 74 Partitions: Sch.4 para.6 77 Transfer of land in consideration of services other than works: Sch.4 para.11(1) 77 Transfer of land in consideration of works: Sch.4 para Works: computing the chargeable consideration: Sch.4 para.10(3)(b) 81 Package deal for purchase of site and erection of building 83 7 Companies. Market Value 8 Sub-sales etc. Companies for SDLT 87 Definition of company 87 Holding property in a company as a means of SDLT minimisation 88 Transfers to connected companies: the market value rule: s Market value 92 Exceptions to the market value charge: s Company distributions and debt 96 The land law background 99 The old SDLT exemption for B: old s The new exemption: new s.45 and Sch.2A 104 Sub-sales 105 Assignments 109 Novations 110 Who is the Vendor? Sch.2A paras 8, 10, SDLT avoidance arrangements: Sch.2A para Back-to-back sub-sales: completion arrangements 111 Compliance 112 ix

8 Stamp Duty Land Tax 9 Leases: the charge on rents Introduction 113 What is a lease? 114 The term of a lease 115 The rates: Sch.5 para Net present value: Sch.5 paras 3, Chargeable rent: fixed term leases: Sch.5 paras RPI-indexed rents: Sch.17A para.7(5) 121 Turnover rents 122 Abolition of the abnormal rent increase rules 122 Fixed term leases: tax planning 122 Fixed term leases: holding over, then new lease granted: Sch.17A paras 3, 3A, 9A 123 The position of an assignee: Sch.17A para Fixed term leases: holding over but no new lease granted: Sch.17A para.3(6) 129 Periodic leases: Sch.17A para Linked leases: Sch.5 paras 2(5), (6), Sch.17A para Value added tax 131 Service charges 133 Ad hoc rent increase in first five years: Sch.17A para Surrender and regrant, overlap relief: Sch.17A paras 9, Assignments treated as new leases: Sch.17A para Reversionary leases Leases: other matters Tenant s obligations which are not consideration: Sch.17A para Premiums: Sch.5 paras 9, 9A 140 Agreements for lease: Sch.17A para.12a 141 Assignment of agreement for lease: Sch.17A para.12b 144 Sale and leaseback: s.57a 145 Deposits and loans as premiums: Sch.17A para.18a 148 Variations of leases 149 Reverse premiums: Sch.17A para x

9 Contents 11 Group and reconstruction reliefs 12 Partnerships Introduction 153 Group relief: Sch.7 paras per cent + of the ordinary share capital: Sch.7 para.1(2)(b), (3)(a), (4), (5) per cent + of real equity: Sch.7 para.1(3)(b), (c), (6), (6A), Corporation Tax Act 2010 ss , 175, Arrangements which rule group relief out: Sch.7 paras 2 2B 160 Must be bona fide commercial and not for tax avoidance: Sch.7 para.2(4a) 165 Group relief: procedure 168 Group relief clawback: Sch.7 paras Triggering the clawback: the main rule: Sch.7 para Exceptions from clawback: Sch.7 paras 4, 4ZA 173 Introductory 176 Reconstruction relief: Sch.7 para Acquisition relief: Sch.7 para Reconstruction and acquisition reliefs: procedure 181 Clawback of reconstruction and acquisition reliefs: Sch.7 para Introduction 185 Some general principles: Sch.15 paras An ordinary SDLT charge: Sch.15 paras Introduction 187 Transfer of property by partner or connected person to the partnership: Sch.15 paras Transfer of interest in property-investment partnership: Sch.15 para Transfer of interest in non-property-investment partnership pursuant to prior arrangements: Sch.15 para Stamp duty on transfers of partnership interests: Sch.15 paras Transfer of property by partnership to partner or connected person: Sch.15 paras xi

10 Stamp Duty Land Tax Transfer from a partnership to a partnership: Sch.15 para Interaction with group relief 206 Conversion of partnership into new LLP: s Incorporation of a partnership 209 Partnerships and s.75a: s.75c(8a) Trusts and other matters Introduction. Bare trusts: Sch.16 paras 1, Bare trusts: leases: Sch.16 para.3(2) (4) 214 Settlements 215 Pension funds 217 Settlements: accountability of trustees: Sch.16 paras 5, Personal representatives and estates 218 Divorce, etc.: Sch.3 paras 3 and second 3A Charities and the public sector The relief: what is a charity? Sch.8 para Clawback: Sch.8 para Mostly charitable use: Sch.8 para Joint purchase by charity and non-charity: Sch.8 paras 3A 3C 224 Complete exemption for certain bodies: ss.107, 67A 226 Exemption for public bodies in connection with reorganisations: s Compulsory purchase 227 Acquisitions by authorities under s.106 agreements: s Relief for PFI-type deals: Sch.4 para Transfers as a result of changes in parliamentary constituencies: s Special reliefs for Residential Property Introduction 231 Purchase of buyer s old dwelling by housebuilder: Sch.6A para Purchase of new-building-buyer s old dwelling by property trader: Sch.6A para xii

11 Contents Purchase of old dwelling by chain-breaking trader: Sch.6A para Purchase of dwelling by trader from personal representatives: Sch.6A para Relocation of employment: purchase of old dwelling by employer: Sch.6A para Relocation of employment: purchase of old dwelling by property trader: Sch.6A para Clawback of exemption in property trader cases: Sch.6A para Purchases by social landlords: s Limited exemption for tenancies granted by social landlords: Sch.3 para Right to buy transactions: Sch.9 para Shared ownership leases: Sch.9 paras Shared ownership trusts: Sch.9 paras Rent to mortgage acquisitions: Sch.9 para Alternative Property Finance 17 Anti-avoidance Introduction 243 What is a financial institution? 244 Who is a person? 245 Relationship with group relief 245 Anti-avoidance: arrangements to transfer control of the financial institution 245 Land sold to a financial institution and leased to the buyer: s.71a 246 Land sold to a financial institution and resold to the buyer: s Relying on the alternative finance provisions combined with another relief 248 Alternative Finance Investment Bonds 249 Introduction 251 Purposivism 251 TAARs 253 Introduction 254 The basic rule 255 xiii

12 Stamp Duty Land Tax 18 Returns Incidental transactions: s.75b 258 Other matters: s.75c 259 Stamp Office practice 261 Compliance 265 Retrospective legislation 265 Introduction 266 Introduction 267 What schemes have to be disclosed? Finance Act 2004 ss.306, Arrangements Regulations Who must disclose? Finance Act 2004 ss.307, 309, What must be disclosed and when? Finance Act 2004 ss.308, 309, 310, Information Regulations 2012 rr.4, Legal professional privilege: Finance Act 2004 s.314, Promoters Regulations 2004 r Scheme reference numbers: Finance Act 2004 ss ZA 274 Penalties: Taxes Management Act 1970 s.98c 275 The obligation to notify: ss.77, 77A 277 The SDLT 1, SDLT 2, SDLT 3 and SDLT 4 forms 279 No white space. Disclosure to the Stamp Office. Rulings 282 Sending in the return and payment. The filing date 283 Interaction with land registration: s Enquiries, discovery, penalties, etc. Introduction 287 Records: Sch.10 paras Correction of return by Stamp Office: Sch.10 para Amendment of return by purchaser: Sch.10 para Enquiries: Sch.10 paras Demands for tax during the Enquiry 291 Concluding the Enquiry: Sch.10 paras 23, Stamp Office s power to demand information and documents: Finance Act 2008 Sch Stamp Office s right to inspect: Finance Act 2008 Sch Stamp Office determinations: Sch.10 paras Discovery assessments: Sch.10 paras Time limits for discovery assessments: Sch.10 para xiv

13 Contents Refunds of overpaid SDLT: Sch.10 paras 34 34E 301 Interest: ss.87, Penalty for failing to file return on time: Sch.10 paras No penalty for failure to pay on time 305 Penalty for inaccurate returns and other communications: Finance Act 2007 Sch Appeals and Reviews The Tribunal s jurisdiction: Sch.10 para Making the appeal: Sch.10 para Sometimes there is a review: Sch.10 paras 36A 36I 313 Settlements with the Stamp Office: Sch.10 para Judicial review 315 Connected Persons 317 xv