This relief is available where leaseholders of flats act together to exercise a statutory right to purchase the freehold of the block.
In these cases the freehold is acquired in a single transaction by a nominee or appointee (which may be one or more individuals or a company) acting on behalf of the leaseholders.
The relief acts to determine the rate of tax chargeable by dividing the total consideration given for the freehold by the number of flats leased by tenants who are participating in the exercise of the right. The rate of tax appropriate to that proportion of the consideration is then applied to the total consideration for the transaction.
This brings the rate of tax more in line with that which would have applied if the leaseholders had been able to purchase their shares of the freehold separately.
A nominee acting on behalf of the lessees of eight out of ten flats in a block, one of whom leases two flats, purchases the freehold of the block for £600,000. The rate of tax applicable to this transaction without relief would be 4 per cent as the consideration exceeds £500,000.
As the statutory right is being exercised by the lessees of eight flats, the £600,000 consideration is divided by eight (£75,000). The rate of tax is therefore 0 per cent and no tax is payable.
The nominee or appointee must claim the relief in a land transaction return
using relief code 25.
This relief can be claimed only where the effective date of the transaction
is on or after 22 April 2009. Before that date the relief applies
only to purchases undertaken by a statutory 'right to enfranchise' or RTE
company. Section 4A Leasehold Reform, Housing & Urban Development Act
1993, which provided for RTE companies, was not brought into force.
FA03/S74 provides detailed rules to determine the rate at which Stamp Duty Land Tax is charged for these transactions.
The relief applies only where the purchase is in exercise of
It applies where a chargeable transaction is entered into by a person or persons nominated or appointed by qualifying tenants of flats contained in premises.
The rate of tax is determined by the fractional proportion of the relevant consideration produced by dividing the total amount of the relevant consideration by the number of qualifying flats contained in the premises. 'Relevant consideration' has the meaning given by FA03/S55.
'Qualifying flats' means flats held by qualifying tenants who are participating in the exercise of the statutory right concerned, under the terms of that right. This may be fewer than the total number of flats in the block.
'Flats' and 'qualifying tenants' in respect of each statutory right are defined in the legislation which confers that right.
This does not include cases where a tenant reaches a separate agreement with
the nominee or appointee to purchase an extension of his or her lease, without
participating in the purchase of the freehold.
The legislation is silent about how any resulting Stamp Duty Land Tax liability
is to be shared among the participants: this is a matter for agreement between
them.
