Section 196, Schedule 40: Stamp Duty Land Tax Relief from 15% Rate
Summary
1.Section 196 introduces Schedule 40 which provides for a number of reliefs from the higher rate of Stamp Duty Land Tax charged by Schedule 4A Finance Act 2003. This rate is charged on acquisitions of interests in dwellings of value greater than £2 million by certain companies, partnerships with company members and collective investment schemes. The reliefs reduce the rate of tax chargeable to that applying to acquisitions of high value residential properties by others. They exclude from the higher rate dwellings held for a number of commercial purposes.
Details of the Schedule
2.Paragraph 1 is introductory
3.Sub-paragraph 2(1) states that Schedule 4A FA 2003 is to be amended. Twelve new paragraphs replace the existing relief for property development trades with relief for a wider range of commercial uses of the dwelling. Eight new paragraphs provide for giving and withdrawing the relief in cases subject to Alternative Finance Arrangements. Three sections of FA 2003 are amended, and one new section added, to deal with the tax return and payment consequences of withdrawal of relief.
4.Sub-paragraph 2(2) inserts new paragraphs 5 to 5K and 6A to 6H to replace the existing paragraph 5 in Schedule 4A FA 2003. This paragraph currently provides relief only for certain property developers.
5.New paragraphs 5 and 5A deal with relief for property rental businesses, property development trades and property trading businesses. New Paragraphs 5B to 5K deal with trades making a dwelling available to the public, financial institutions acquiring dwellings in the course of lending, dwellings for employee occupation and farmhouses.
6.New paragraphs 6A to 6H modify these reliefs where the dwelling is subject to alternative finance arrangements
7.Sub-paragraph 2(3) substitutes a new Paragraph 5 into Schedule 4A
8.New sub-paragraph 5(1) disapplies Paragraph 3 of Schedule 4A FA 2003, which imposes the 15% rate on certain transactions, if the interest in land is acquired exclusively for one of four purposes:
exploitation as a source of rents or other receipts in a property rental business;
development, redevelopment and resale in a property development trade;
as an exchange property in a property development trade; and
resale in a property trading business.
9.New sub-paragraph 5(2) states that the interest is not to be regarded as exclusively acquired for one of these purposes if it is intended that certain types of individual (“non-qualifying individuals”) will be permitted to occupy the dwelling.,.
10.New sub-paragraph 5(3) defines terms used in paragraphs 5(1) and 5(2), including requirements that trades be on a commercial basis with a view to profit
11.Sub-paragraph 5(4) inserts new paragraphs 5A to 5K into Schedule 4A
12.New sub-paragraph 5A(1) defines a non-qualifying individual, in a way that is analogous to that for the annual tax on enveloped dwellings, but by reference to the purchaser of the land.
13.New paragraphs 5B to 5K provide other reliefs for properties as follows:
14.New sub-paragraph 5B(1) disapplies Paragraph 3 of Schedule 4A FA 2003, which imposes the 15% rate on certain transactions, if certain conditions are met, that are set out in new sub-paragraph 5B(2).
15.New sub-paragraph 5B(2) states one set of conditions to be that the interest in the property is acquired with the intention that the dwelling to be used in a qualifying trade, and that reasonable commercial plans have been made to exploit the property without delay, unless delay is justified by commercial considerations or is unavoidable.
16.New sub-paragraph 5B(3) defines a qualifying trade as one which involves offering the public the opportunity to stay in, make use of, or otherwise enjoy the dwelling, provided it is carried on on a commercial basis and in the normal course the dwelling is made available to the public for at least 28 days in any year.
17.New sub-paragraphs 5B(4) and (5) require that the public must be permitted to use a significant proportion of the interior of the building for the trade to qualify, taking into account the size, nature and function of the part which they are permitted to use.
18.New sub-paragraphs 5C(1) and (2) disapply Paragraph 3 of Schedule 4A FA 2003, which imposes the 15% rate on certain transactions, to the acquisition of land if the purchaser is a financial institution carrying on a business involving the lending of money, in so far as the land is acquired for resale and in connection with the lending activities. Financial Institution is defined in modified Paragraph 9 of Schedule 4A FA 2003: see sub-paragraph 2(6) of Schedule 38.
19.New sub-paragraph 5D(1) disapplies Paragraph 3 of Schedule 4A FA 2003, which imposes the 15% rate on certain transactions, if conditions set out in new Paragraph 5D(2) are met. It specifies that they can only be met if the purchaser or a relevant group member (defined in sub-paragraph 5D(6)) carries on or is to carry on a qualifying trade.
20.New sub-paragraph 5D(2) sets out that the conditions are that the dwelling is acquired for the purpose of making it available as living accommodation for “qualifying individuals”, for purposes that are solely or mainly purposes of the qualifying trade.
21.New sub-paragraph 5D(3) clarifies that the accommodation can be for individuals generally or for specifically identified individuals.
22.New sub-paragraph 5D(4) defines a qualifying trade as one carried on on a commercial basis with a view to profit.
23.New sub-paragraph 5D(5) specifies that provision for an individual includes provision for the individual’s family living with the employee.
24.New sub-paragraph 5D(6) defines a group of companies as the same as a group for Stamp Duty Land Tax group relief purposes.
25.New sub-paragraph 5E(1) defines a qualifying partner as an individual who is a member of a partnership of which the person carrying on the qualifying trade in new sub-paragraph 5D(1) is also a member..
26.New sub-paragraph 5E(2) defines a qualifying individual as an individual employed for the purposes of the qualifying trade .
27.New sub-paragraph 5E(3) prevents relief being given if the individuals to whom it is proposed the dwelling is to be made available are likely to include members of the partnership who have a 10% or greater share in the income profits of the partnership, in a company holding the interest in the dwelling or in the interest itself.
28.New sub-paragraph 5E(4) similarly prevents relief if individuals to whom the dwelling is likely to be made available include employees of the relevant trade who have a 10% or greater share of the income profits of the trade, or in any company holding the interest in the dwelling or in the interest itself. Additionally relief is prevented if the individuals include those employed to provide excluded domestic services. These are defined in new sub-paragraph 5E(5).
29.New sub-paragraph 5E(5) defines excluded domestic services as services in connection with actual or intended occupation of the dwelling or a linked dwelling by an individual specified in new sub-paragraph 5E(6).
30.New sub-paragraph 5E(6) specifies the individual referred to in new sub-paragraph 5E(5) as one who is connected with a person beneficially entitled (or who is to be beneficially entitled) to the higher threshold interest in the dwelling.
31.New sub-paragraph 5E(7) defines linked dwellings according to the definitions in the Annual Tax on Enveloped Dwellings legislation.
32.New sub-paragraph 5E(8) treats beneficial joint tenants (in Scotland, joint owners) as having equal shares in the dwelling.
33.New Paragraph 5C(9) applies here the definition of a 10% or more share in a company set out in section 145 of FA 2013 (the annual tax on enveloped dwellings legislation).
34.New sub-paragraph 5F(1) disapplies Paragraph 3 of Schedule 4A FA 2003, which imposes the 15% rate on certain transactions, if the higher threshold interest is in or over a dwelling used, or to be used, as a farmhouse and the conditions set out in new paragraph 5F(3) are met.
35.New sub-paragraph 5F(1) disapplies Paragraph 3 of Schedule 4A FA 2003, which imposes the 15% rate on certain transactions, if the higher threshold interest is in or over a dwelling that is, or is to be, a farmhouse and the conditions set out in new paragraph 5F(3) are met.
36.New sub-paragraph 5F(2) defines a farmhouse for these purposes as a dwelling that forms part of land that is occupied (or to be occupied) for the purposes of a farming trade and which is appropriate in character to the size of the farm and the nature and scale of the farming trade to be carried on there.
37.New sub-paragraph 5F(3) states that the conditions are (i) for the dwelling to be occupied for the purposes of the farming trade by a qualifying farm worker, (ii) that reasonable commercial plans have been made for such occupation to start without delay except where justified by commercial considerations or is unavoidable, and (iii) that occupation by a qualifying farm worker is expected to continue as part of the normal way that farming trade is carried on.
38.New sub-paragraph 5F(4) defines a qualifying farm worker as an individual who occupies the farmhouse for the purposes of a farming trade in which he or she has substantial day to day involvement.
39.New sub-paragraph 5F(5) defines a qualifying trade of farming as one carried on on a commercial basis and with a view to profit.
40.New sub-paragraph 5F(6) states that a person who occupies part of a dwelling is treated as occupying the dwelling.
41.New sub-paragraph 5F(7) applies the definition of “farming” from Corporation Tax Act 2010 but with the inclusion of market gardening as defined in Corporation Tax Act 2010.
42.New paragraphs 5G – 5K provide that the reliefs from the higher rate of Stamp Duty Land Tax may, in certain circumstances, be withdrawn if the relevant conditions cease to be met within the three years following the acquisition of the interest.
43.New sub-paragraph 5G(1) provides that reliefs within paragraph 5 (property rental businesses, property development trades and property trading businesses) may be withdrawn under sub-paragraph 5G(2).
44.New sub-paragraph 5G(2) withdraws relief under paragraph 5 if, at any time in the three years following the acquisition, one or more of the requirements in paragraph 5G(3) are not met.
45.New sub-paragraph 5G(3) sets out the requirements that (i) the interest, or any derived interest, in the dwelling, if still held by the purchaser, is held exclusively for the purposes of one or more of a property rental business, a property development trade or property trading business and (ii) no non-qualifying individual (as defined in 5(7)) is permitted to occupy the dwelling.
46.New sub-paragraph 5G(4) provides that, if it is not reasonable to expect the dwelling to be used for the intended purpose because of circumstances beyond the purchaser’s control, the requirement that the interest is held for the purposes of one or more of a property rental business, property development trade or property trading business does not apply.
47.New sub-paragraph 5G(5) provides that sub-paragraph 5G(6) will apply if, within the three years following the acquisition, the activity for which the property interest was acquired which qualified it for relief under paragraph 5 either has not begun or has ceased.
48.New sub-paragraph 5G(6) provides that an interest will only be treated as being held for a purpose eligible for relief if reasonable steps are being taken to ensure that that purpose is carried out.
49.New sub-paragraph 5G(7) applies the definition of non-qualifying individual from paragraph 5A.
50.New sub-paragraphs 5H(1) and (2) provide that relief from the 15% rate for trades which involve opening a dwelling to the public may be withdrawn if, at any time in the three years following the acquisition, the requirement in paragraph 5H(3) is not met.
51.New sub-paragraph 5H(3) sets out the requirements that the interest (if still held by the purchaser) is being exploited as a source of income in the course of a qualifying trade, as is any interest held by the purchaser derived from that interest.
52.New sub-paragraph 5H(4) provides that relief will not be withdrawn if, due to circumstances beyond the purchaser’s control, it is not reasonable to expect the dwelling to be exploited as a source of income in the specified way.
53.New sub-paragraph 5H(5) and (6) provide that if, within the three years following the acquisition, the exploitation of the interest as a source of income in a qualifying trade either has not begun or has ceased, the relevant interest will only be treated as being exploited as a source of income in a qualifying trade if reasonable steps are being taken to ensure that the interest begins to be so exploited or that such exploitation resumes.
54.New sub-paragraphs 5I(1) and (2) provide that relief from the 15% rate for financial institutions acquiring the property interest in the course of lending may be withdrawn if any of the requirements in sub-paragraph 5H(3) are not met in the three years after the acquisition of the interest.
55.New sub-paragraph 5I(3) provides two requirements: that the purchaser continues to be a financial institution carrying on a business of lending money, and the interest is held for the purpose of resale in that business.
56.New sub-paragraph 5I(4) restricts these requirements to times in the three years when the purchaser holds the interest acquired or any interest derived from it.
57.New sub-paragraph 5I(5) provides that relief will not be withdrawn if, due to circumstances beyond the purchaser’s control, it is not reasonable to expect the requirements to be met.
58.New sub-paragraph 5J(1) provides that relief from the 15% rate for dwellings for occupation by certain employees and partners may be withdrawn under sub-paragraph 5G(2).
59.New sub-paragraph 5J(2) withdraws relief if, at any time in the three years following the acquisition, any requirement in paragraph 5J(3) is not met.
60.New sub-paragraph 5J(3) sets out the requirements that:
the purchaser (or a group member) carries on a qualifying trade;
the dwelling is made available to one or more qualifying individuals for use as living accommodation; and
the dwelling is made available solely or mainly for trade purposes.
61.New sub-paragraph 5J(4) provides that these requirements only apply while the purchaser still holds the interest acquired (or an interest derived from that interest).
62.New sub-paragraph 5J(5) provides that relief will not be withdrawn if, due to circumstances beyond the purchaser’s control, it is not reasonable to expect these requirements to be met.
63.New sub-paragraph 5J(6) provides that sub-paragraph 5G(7) will apply if, within the three years following the acquisition, the dwelling has not begun to or has ceased to be made available as accommodation within the conditions for the relief.
64.New sub-paragraph 5J(7) provides that a dwelling will only be treated as being made available to one or more qualifying individuals for use as living accommodation if reasonable steps are being taken to ensure that the dwelling will begin to be, or will return to being, so available.
65.New sub-paragraph 5K(1) provides that relief from the 15% rate for farmhouses may be withdrawn under sub-paragraph 5K(2).
66.New sub-paragraph 5K(2) withdraws relief if, at any time in the three years following the acquisition, the requirements in paragraph 5K(3) are not met.
67.Sub-paragraph 2(5) inserts new paragraphs 6A-6H in Schedule 4A FA 2003. These paragraphs modify the application of Schedule 4A for cases which involve alternative finance arrangements.
68.New paragraph 6A deals with alternative finance arrangements which come within section 71A, section 72 or section 73, FA 2003.
69.New sub-paragraph 6A(1) provides that paragraph 6A will apply where any of section 71A, section 72 or section 73 applies and the major interest purchased under the first transaction includes a higher threshold interest.
70.New sub-paragraph 6A(2) defines “the first transaction” for the purposes of this paragraph.
71.New sub-paragraph 6A(3) provides that the condition in paragraph 3(3) (that the purchaser is a company, or that the purchase is made by or on behalf of a partnership with a corporate member or for the purposes of a collective investment scheme) is only treated as being met in respect of the first transaction where that condition is satisfied in respect of the second transaction.
72.New sub-paragraph 6A(4) provides that the first transaction will qualify for a relief under paragraphs 5(1), 5B(1), 5D(2) or 5F(1) where the second transaction qualifies for the relief in question (assuming, for this purpose, that the subject matter of the second transaction is a higher threshold interest and so within the scope of those reliefs even if it is not).
73.New sub-paragraph 6A(5) provides that the first transaction will not qualify for relief under paragraphs 5(1), 5B(1), 5D(2) or 5F(1) except in accordance with sub-paragraph (4) (i.e. only where the second transaction would qualify for relief under any of those provisions).
74.New sub-paragraph 6A(6) provides that “the second transaction” shall have the same meaning in this paragraph as in section 71A, 72 or 73 (as appropriate).
75.New paragraph 6B deals with alternative finance arrangements which come within section 72A.
76.New sub-paragraph 6B(1) provides that paragraph 6B will apply where section 72A applies and the major interest purchased under the first transaction includes a higher threshold interest.
77.New sub-paragraph 6B(2) provides that whether the condition in paragraph 3(3) is met is to be determined as if the financial institution was not one of the purchasers acquiring a major interest in land under the first transaction.
78.New sub-paragraph 6B(3) provides that paragraphs 5 to 5F also apply as if the financial institution was not one of the purchasers under that transaction.
79.New sub-paragraph 6C(1) provides that, where a first transaction is split into two transactions under paragraph 2(4), paragraph 6A or 6B applies to both transactions.
80.New sub-paragraph 6C(2) provides that, where the second transaction (for the purposes of paragraph 6A) includes a chargeable interest other than a higher threshold interest, that fact is ignored when determining whether the transaction (i) meets the condition in paragraph 3(3) or (ii) qualifies for relief under paragraphs 5(1), 5B(1), 5D(1) and 5F(1).
81.New paragraphs 6D-6H provide for the situation where a transaction within paragraph 6A or 6B has been allowed relief from the higher rate of SDLT, and that relief has subsequently been withdrawn.
82.New sub-paragraph 6D(1) provides that paragraph 6D applies where relief has been allowed under paragraph 5 for a business of letting, trading in or developing properties in respect of an alternative property finance transaction within paragraph 6A(4) or 6B(3).
83.New sub-paragraph 6D(2) states that the relief will be withdrawn where at any time in the following three years (the control period) a relevant requirement ceases to be met.
84.New sub-paragraph 6D(3) specifies that the “relevant requirements” are that: (i) any relevant interest held by the relevant person is held exclusively for a purpose which is relievable under paragraph 5 (that is to say, a business of letting, trading in or developing properties); and (ii) no non-qualifying individual is permitted to occupy the dwelling.
85.New sub-paragraph 6D(4) confirms that it does not matter for the purposes of this paragraph whether the relevant interest is held by the relevant person jointly (or in Scotland, in common) or otherwise.
86.New sub-paragraph 6D(5) defines “relevant interest” in respect of any relief allowed under paragraph 6A(4).
87.New sub-paragraph 6D(6) defines “relevant interest” in respect of any relief allowed under paragraph 6B(3).
88.New sub-paragraph 6D(7) defines “non-qualifying individual” and “the relevant person” for the purposes of this paragraph.
89.New sub-paragraph 6E(1) provides that the requirement in paragraph 6D(3)(a) - that any relevant interest is held exclusively for a purpose which is relievable under paragraph 5 - does not apply where it is no longer reasonable to expect the interest to be held for that purpose due to an unforeseen change of circumstances that is beyond the relevant person’s control.
90.New sub-paragraph 6E(2) provides that sub-paragraph (3) will apply where an interest is acquired for a relievable purpose but that, at some point during the three year control period, the activity in question has either not begun or has ceased.
91.New sub-paragraph 6E(3) provides that, for the purposes of paragraph 6D(3)(a), the relevant interest will only be treated as held for the purpose in question if reasonable steps are being taken to ensure that that purpose is carried out.
92.New sub-paragraph 6E(4) defines “control period” “relevant interest”, “the relevant person” and references to “initial interest” for the purposes of this paragraph.
93.New sub-paragraph 6F(1) provides that paragraph 6F applies where relief has been allowed under paragraph 5B (for a trade involving making a dwelling open to the public) in respect of an alternative property finance transaction within paragraph 6A or 6B.
94.New sub-paragraph 6F(2) states that the relief will be withdrawn where, at any time in the following three years (the control period), the requirement in sub-paragraph (3) ceases to be met.
95.New sub-paragraph 6F(3) specifies that the dwelling must be held and exploited by the relevant person (whether jointly, in common, or otherwise) as a source of income in the course of a qualifying trade.
96.New sub-paragraph 6F(4) provides that the requirement in sub-paragraph (3) does not apply where it is no longer reasonable to expect the interest to be exploited in that manner due to an unforeseen change of circumstances that is beyond the relevant person’s control.
97.New sub-paragraph 6F(5) provides that sub-paragraph 6F(6) will apply where an interest is acquired for exploitation as a source of income in the course of a qualifying trade but that, at some point during the three year control period, the relevant person has either not begun or has ceased to exploit the interest in that manner.
98.New sub-paragraph 6F(6) provides that the requirement for the interest is exploited as set out in subparagraph (3) will be treated as met only if reasonable steps are being taken to ensure that such exploitation begins or is resumed.
99.New sub-paragraph 6F(7) defines “the relevant person” for the purposes of this paragraph and provides that a reference to a major interest in land includes an undivided share in such an interest.
100.New sub-paragraph 6G(1) provides that paragraph 6G applies where relief has been allowed under paragraph 5D (dwellings for occupation by certain employees etc) in respect of an alternative property finance transaction within paragraph 6A or 6B.
101.New sub-paragraph 6G(2) states that the relief will be withdrawn where, at any time during the control period when a relevant person holds a relevant interest, any requirement in sub-paragraph (4) ceases to be met.
102.New sub-paragraph 6G(3) defines the “control period” as being the three years from the effective date of the first transaction.
103.New sub-paragraph 6G(4) specifies the requirements as:
the relevant person (or a relevant group member) must be carrying on a qualifying trade;
the dwelling must be made available as mentioned in paragraph 5D(2)(a) (that is to say, to one or more qualifying individuals for use as living accommodation); and
the dwelling is made so available for the purposes of that qualifying trade.
104.New sub-paragraph 6G(5) provides that the requirements in sub-paragraph (4) do not apply where it is no longer reasonable to expect that they will be met due to an unforeseen change of circumstances that is beyond the relevant person’s control.
105.New sub-paragraph 6G(6) provides that sub-paragraph (7) will apply where the relevant interest has not begun to be made available in accordance with sub-paragraphs (4)(b) and (c), or has ceased to be made available in that manner during the control period.
106.New sub-paragraph 6G(7) provides that the requirements under sub-paragraphs (4)(b) and (c) will be treated as being met only if reasonable steps are being taken to ensure that the dwelling will begin to be, or will return to being, made available as required by those subparagraphs.
107.New sub-paragraph 6G(8) provides that, where the relevant person is a company, “relevant group company” means a member of a the same group of companies as the relevant person in accordance with paragraph 1(2) of Schedule 7.
108.New sub-paragraph 6G(9) defines “relevant interest” and “the relevant person” for the purposes of this paragraph and provides that a reference to a major interest in land includes an undivided share in such an interest.
109.New sub-paragraph 6H(1) provides that paragraph 6H applies where relief has been allowed under paragraph 5F (farmhouses) in respect of an alternative property finance transaction within paragraph 6A or 6B.
110.New sub-paragraph 6H(2) states that the relief will be withdrawn where, at any time during the control period when a relevant person holds a relevant interest (whether jointly, or in common, or otherwise), any requirement in sub-paragraph (4) ceases to be met.
111.New sub-paragraph 6H(3) defines the “control period” as being the three years from the effective date of the first transaction.
112.New sub-paragraph 6H(4) specifies the requirements are that:
the land mentioned in paragraph 5F(2)(a) is occupied for the purposes of a qualifying trade of farming; and
the dwelling is occupied for the purposes of that trade by a qualifying farm worker.
113.New sub-paragraph 6H(5) provides that the requirements in sub-paragraph (4) do not apply where it is no longer reasonable to expect that they will be met due to an unforeseen change of circumstances that is beyond the relevant person’s control.
114.New sub-paragraph 6H(6) provides that sub-paragraph 6H(7) will apply where, during the control period, a requirement in sub-paragraph (4) has not begun, or has ceased to be met.
115.New sub-paragraph 6H(7) provides that the requirements under sub-paragraph (4) will be treated as being met only if reasonable steps are being taken to ensure that the requirements begin to be, or return to being, satisfied.
116.New sub-paragraph 6H(8) defines “relevant interest” and “the relevant person” for the purposes of this paragraph and provides that a reference to a major interest in land includes an undivided share in such an interest.
117.Sub-paragraph 2(6) provides that references to “financial institution”, “property development trade”, “property rental business”, “property trading business”, “qualifying farm worker”, “qualifying trade” and “qualifying trade of farming” should be inserted, at the appropriate places, in paragraph 9 of Schedule 4A.
118.Paragraph 3 amends section 81 FA 2003 which provides that, where relief is withdrawn in certain circumstances, a purchaser is obliged to file a further land transaction return.
119.Sub-paragraph 3(2) inserts two new sub-sections into section 81 FA 2003 to provide for further returns to be filed where the relief from the 15% rate is withdrawn.
120.New sub-section 81(1A) provides that where relief from the 15% rate is withdrawn under new paragraphs 5G-5K (summarised above), the purchaser must deliver a further return within 30 days after the relevant date provided for in new sub-section 81(1B).
121.New sub-section 81(1B) specifies, for each relief, the relevant date from which the 30 day period, in which the further return must be delivered, is calculated.
122.Sub-paragraph 3(3) amends sub-section 81(2A) FA 2003 so that it does not apply to new-subsection 81(1A).
123.Sub-paragraph 3(5) inserts a new sub-section 81(5) which provides that Schedule 10 will apply to a return under new-subsection 81(1A) as it applies to a return under section 76, but that references to the “effective date” of the transaction in that schedule are to be read as references to the appropriate relevant date specified in new subsection 81(1B).
124.Paragraph 4 inserts a new section 81ZA in FA 2003 to provide for further returns to be filed where the relief from the 15% rate is withdrawn in the context of an alternative finance arrangement.
125.New sub-section 81ZA(1) provides that, where relief from the 15% rate is withdrawn under any of new paragraphs 6D, 6F, 6G or 6H (summarised above) the relevant person must deliver a return to HMRC within 30 days of the date of the disqualifying event (as determined under sections 81ZA(3) and (4)). The return must contain a self-assessment of the additional tax which has become chargeable as a result of the relief being withdrawn (which will be calculated by reference to the rates of SDLT which were in force at the effective date of the transaction which was relieved and not the rates in force when the relief is withdrawn).
126.New sub-section 81ZA(2) provides that Schedule 10 will apply to a return under section 81ZA as it applies to a return under section 76, but that:
references to the “effective date” of the transaction in that schedule are to be read as references to the date of the disqualifying event ; and
references to the purchaser are to be read as references to the relevant person (so far as that is necessary under new section 81ZA(1) or new section 85(3)).
127.New sub-section 81ZA(3) defines “the date of the disqualifying event” as the first day in the control period on which a relevant requirement was not met.
128.New sub-section 81ZA(4) defines what is a “relevant requirement” in respect of each relief.
129.New sub-section 81ZA(5) defines “the control period” for the purposes of this section.
130.New sub-section 81ZA(6) defines “alternative finance arrangements” and “the relevant person” for the purposes of this section.
131.Paragraph 5 inserts two new sub-sections into section 85 FA 2003 to modify the liability to tax where relief from the 15% rate is withdrawn in the context of an alternative finance arrangement.
132.New sub-section 85(3) provides that, where relief is withdrawn in respect of a transaction entered into as part of alternative finance arrangements, sub-section 85(1) (which states that the purchaser is liable to pay any tax in respect of a chargeable transaction) does not apply in relation to the additional tax which becomes payable. Instead, it is the relevant person who must pay that additional tax.
133.New sub-section 85(4) provides that the “relevant person” means the person, apart from the financial institution, who entered into the alternative finance arrangement.
134.Paragraph 6 inserts a new sub-section into section 86 FA 2003 to deal with the payment of tax where relief from the 15% rate is withdrawn in the context of an alternative finance arrangement.
135.New sub-section 86(2A) provides that the tax payable where relief is withdrawn must be paid by the filing date for the return required under section 81ZA(1) in respect of the withdrawal.
136.Paragraph 7 modifies the entry for “settlement” in the table of definitions in section 122 FA 2003.
Background
137.Finance Act 2012 introduced a 15 per cent rate of stamp duty land tax on the acquisition by certain non-natural persons of properties costing more than £2 million. The measure formed part of a package designed to ensure that individuals and companies pay a fair share of tax on residential property transactions and to reduce avoidance. Its aim was to dis-incentivise the ownership of high value residential property in structures that would permit the indirect ownership or enjoyment of the property to be transferred in a way that would not be chargeable to SDLT
138.The section is to have effect for land transactions where the effective date is on or after the date Royal Assent is given to Finance Act 2013. The effective date is normally the date on which a contract is completed, but may be earlier if the land is occupied or the consideration for the transaction is given before that date.
139.Finance Act 2012 provided only two exclusions from the higher rate charge; for companies acting solely in their capacity as trustees, and for property developers with a 2 year trading history.
140.The scope of the 15 per cent rate was included as part of the consultation on the annual tax on enveloped dwellings that was held over Summer 2012.
141.In response to the consultation a number of reliefs will be introduced to reduce the SDLT rate to that applicable to purchases not within the higher rate of SDLT (currently 7 per cent). The new property developer relief no longer has the 2 year trading history condition. Further reliefs are also to be introduced for property rental businesses, property traders, trades that exploit a dwelling to generate income by providing access to a significant part of the interior, dwellings used to house employees or partners with a limited interest in the company or partnership, and farmhouses.
142.Relief will only apply if the property continues to satisfy the relevant qualifying conditions throughout the three years following purchase. If it does not, additional SDLT will become payable.
143.The intention is to stop or reduce the number of properties that will enter such complex ownership structures other than where the property is used in a genuine business. Taken together with the introduction of the annual tax on enveloped dwellings (‘ATED’) from 1 April 2013 on such property owned by non-natural persons, this will result in a reduction in the number of high value properties owned in such structures.
