BN 22 - Stamp Duty Land Tax: Simplification and Clarification of the Law

Who is likely to be affected?

1. Anyone involved in land transactions.

General description of the measure

2. A number of measures will be included in the Finance Bill to simplify and clarify the law relating to stamp duty land tax. In addition Treasury regulations have been made under existing powers to take a number of transactions outside the scope of stamp duty land tax.

Operative date

3. At Royal Assent to Finance Bill 2006, for measures contained in the Finance Bill.

4. 12 April 2006 for measures contained in Treasury regulations.

Current law and proposed revisions

5. The law on stamp duty land tax is contained in Part 4 Finance Act 2003, as amended, and regulations made thereunder. We have received a number of representations on areas where the application of the law is complex or unclear.

6. Treasury regulations will provide that a number of features of common transactions will be taken out of the scope of stamp duty land tax. This will be done by deeming these features not to be ‘chargeable consideration’.
These are:

• a gift of property where the donee or beneficiary agrees or is required to pay capital gains tax or inheritance tax arising on the gift;
• the payment of landlord’s reasonable costs on the grant, variation or termination of a lease; and
• a covenant by an agricultural tenant to assign entitlement to the Single Farm Payment to the landlord on termination of the tenancy.

7. The remaining provisions will be included in the Finance Bill.

8. At present there is a charge to stamp duty land tax where there is a transfer of an interest in a partnership, if the partnership property includes land. That charge will be removed for all partnerships whose main activity is the carrying on of a trade (other than a trade of dealing in or developing land) or a profession.

9. There are also two places in the stamp duty land tax legislation on partnerships where there is the possibility of a double charge (the charge on ‘actual consideration’ in paragraph 10 of Schedule 15 and the interaction between paragraphs 14, 17 and 17A of Schedule 15). This potential double charge will be removed.

10. There is uncertainty as to how the rules on ‘successive linked leases’ apply where an agreement for lease is followed by the grant of a lease. The measure will provide that the rules on ‘successive linked leases’ do not apply in these circumstances.

11. The rules on variations in rent will be simplified. The current charge on rent increases not provided for in the lease (paragraph 13 of Schedule 17A) will be restricted to increases in the first five years of the lease. All rent increases after the end of year five, whether provided for in the lease or not, will be subject to the ‘abnormal increase’ rules in paragraphs 14 and 15. The formula for what is an ‘abnormal increase’ will also be simplified.

12. The treatment of rent reviews under the legislation governing agricultural tenancies, and of ‘interim rents’ under the legislation governing business tenancies, will be clarified.

13. The treatment of leases which are ‘backdated’ and expressed to commence immediately after the expiry of a former lease, will be simplified and clarified.

14. The rules for notifying assignments of leases will be clarified to make it clear that where a lease was originally granted for less than seven years its assignment need be notified only if there is stamp duty land tax to pay, or if there is a relief to be claimed.

15. The measure will ensure that transfers of assets between sub-funds of a settlement do not attract a charge to stamp duty land tax.

Further advice

16. If you have any questions about this change, please contact Crispin Taylor, 020 7147 2793, Email