Section 53 Finance Act 2003 applies to all transfers between a vendor (individual or company) and a company connected to them, when the company is the purchaser. The chargeable consideration for such transfers will be not less than the market value at the effective date, of the property transferred, irrespective of the consideration (or lack of it) actually passing.
S53 also has effect where a vendor (individual or company) transfers property to a company and some or all of the consideration for that transfer consists of the issue or transfer of shares in a company with which the vendor is connected.
S 839 Taxes Act 1988 gives the basis upon which an individual/company can be connected to a company.
An individual, A, transfers freehold residential property to company B, for consideration of £170,000.
Stamp Duty Land Tax considerations are:
If A is not connected to B the chargeable consideration will be the amount paid, £170,000 at the rate applicable for residential property at the effective date of the transaction.
If A is connected to B S53 applies and the chargeable consideration for the transaction may be the market value of the property at the effective date. If this were £275,000 this would be the chargeable amount, if however the market value were only £150,000 the chargeable consideration would be £170,000, chargeable at the appropriate rate.
Individual A grants a new lease for residential property to company B in consideration of a release from a debt owed by A of £170,000.
Stamp Duty Land Tax considerations are:
If A is not connected to B the chargeable consideration will be the value of the debt released - £170,000 at the rate applicable for residential property at the effective date of the transaction, plus any tax due at 1 per cent on the NPV (less the current threshold) of the rent payable.
If A is connected to B, S53 applies and the chargeable consideration for the transaction will be the market value of the property at the effective date. If this were £275,000 this would be the chargeable amount, plus any tax due at 1 per cent on the NPV (less the current threshold) of the rent payable. If, however, the market value were only £150,000 the chargeable consideration would be limited to that amount.
Company C transfers freehold residential property to company B for no consideration.
Stamp Duty Land Tax considerations are:
If C is not connected to B there is no chargeable consideration and no notification is required.
If C is connected to B, S53 applies and the chargeable consideration for the transaction is the market value of the property at the effective date. If this were £275,000 this would be the chargeable amount.
Individual A transfers freehold residential property to company B in consideration of the issue of new shares in company C.
Stamp Duty Land Tax considerations are:
If A is not connected to B or C the chargeable consideration will be the market value of the shares acquired at the rate applicable for residential property at the effective date of the transaction.
If A is connected to B or C S53 applies and the chargeable consideration for the transaction will be the market value of the property at the effective date. If this were £275,000 this would be the chargeable amount, if however the market value were less than the market value of the shares issued the chargeable consideration would be the market value of the shares, chargeable at the appropriate rate.
