REV BN 17: Disclosure Rules: Stamp Duty Land Tax and Commercial Property

Who is likely to be affected?

1. Accountants and lawyers who devise and market certain tax schemes and arrangements and clients who use them. Property companies and others who devise their own schemes in-house.

General description of the measure

2. These additional disclosure rules are designed to provide the Inland Revenue with information about schemes and arrangements intended to avoid Stamp Duty Land Tax (SDLT) on commercial property transactions in the UK. The information will enable risk assessment and, where appropriate, counteraction.

Operative date

3. Schemes and arrangements made available or implemented on or after 1 July 2005.

Current law and proposed revisions

4. Finance Act 2004 provides for promoters or users of schemes or arrangements, a main benefit of which might be expected to be a tax advantage, to disclose details of that scheme or arrangements to the Inland Revenue. The Act applies to all the direct taxes. However, regulations narrow the scope of the existing disclosure requirements to schemes and arrangements involving employment or the use of certain financial products where the tax advantage concerns income tax, corporation tax or capital gains tax.

5. The new rules will ensure promoters or users provide details to the Inland Revenue of schemes and arrangements whose use might be expected to provide, as a main benefit of using the scheme, an SDLT advantage concerning property which:

• is not residential property (as defined in section 116 FA 2003); and
• which has a market value of at least £5 million.

6. The Inland Revenue will not issue a reference number for such schemes and a promoter will have no obligation to convey a reference number to a client. Consequently, in most cases users of a scheme will have no obligation to provide the Inland Revenue with information. But in some circumstances the users themselves will be required to provide information about the scheme. This is where:

• the promoter is offshore;
• the user has devised the scheme in-house; or
• the promoter is a lawyer who cannot make a full disclosure without revealing legally privileged material.

In the last case the client can choose to waive the right to privilege and allow the lawyer to make the disclosure.

7. Further details will be included in draft regulations that will be published shortly, together with a partial Regulatory Impact Assessment, on the Inland Revenue website.

Further advice

8. If you have any questions about this change, please contact David Easton on 020 7147 2418 or Crispin Taylor on 020 7147 2793. Information about Budget measures is available on the Inland Revenue website