Finance Bill (HC Bill 49)

Section 207

SCHEDULE 32 Inheritance tax: gifts to charities etc

Reduced rate of inheritance tax

1 After Schedule 1 to IHTA 1984 insert—

“ Schedule 1A 5Gifts to charities etc: tax charged at lower rate

Application of this Schedule

1 (1) This Schedule applies if—

(a) a chargeable transfer is made (under section 4) on the
death of a person (“D”), and

(b) 10all or part of the value transferred by the chargeable
transfer is chargeable to tax at a rate other than nil per cent.

(2) The part of the value transferred that is chargeable to tax at a rate
other than nil per cent is referred to in this Schedule as “TP”.

The relief

2 (1) 15If the charitable giving condition is met—

(a) the tax charged on the part of TP that qualifies for the
lower rate of tax is to be charged at the lower rate of tax,
and

(b) the tax charged on any remaining part of TP is to be
20charged at the rate at which it would (but for this Schedule)
have been charged on the whole of TP in accordance with
section 7.

(2) For the purposes of this paragraph, the charitable giving condition
is met if, for one or more components of the estate (taking each
25component separately), the donated amount is at least 10% of the
baseline amount.

(3) Paragraph 3 defines the components of the estate.

(4) Paragraphs 4 and 5 explain how to calculate the donated amount
and the baseline amount for each component.

(5) 30The part of TP that “qualifies for the lower rate of tax” is the part
attributable to all the property in each of the components for
which the donated amount is at least 10% of the baseline amount.

(6) The lower rate of tax is 36%.

The components of the estate

3 (1) 35For the purposes of paragraph 2, the components of the estate
are—

(a) the survivorship component,

(b) the settled property component, and

(c) the general component.

(2) The survivorship component is made up of all the property
comprised in the estate that, immediately before D’s death, was
joint (or common) property liable to pass on D’s death—

(a) 5by survivorship (in England and Wales or Northern
Ireland),

(b) under a special destination (in Scotland), or

(c) by or under anything corresponding to survivorship or a
special destination under the law of a country or territory
10outside the United Kingdom.

(3) The settled property component is made up of all the settled
property comprised in the estate in which there subsisted,
immediately before D’s death, an interest in possession to which
D was beneficially entitled immediately before death.

(4) 15The general component is made up of all the property comprised
in the estate other than—

(a) property in the survivorship component,

(b) property in the settled property component, and

(c) property that forms part of the estate by virtue of section
20102(3) of the Finance Act 1986 (gifts with reservation).

The donated amount

4 The donated amount, for a component of the estate, is so much of
the value transferred by the relevant transfer as (in total) is
attributable to property that—

(a) 25forms part of that component, and

(b) is property in relation to which section 23(1) applies.

The baseline amount

5 The baseline amount, for a component of the estate, is the amount
calculated in accordance with the following steps—

30Step 1

Determine the part of the value transferred by the chargeable
transfer that is attributable to property in that component.

Step 2

Deduct from the amount determined under Step 1 the appropriate
35proportion of the available nil-rate band.

“The appropriate proportion” is a proportion equal to the
proportion that the amount determined under Step 1 bears to the
value transferred by the chargeable transfer as a whole.

“The available nil-rate band” is the amount (if any) by which—

(a) 40the nil-rate band maximum (increased, where applicable,
in accordance with section 8A), exceeds

(b) the sum of the values transferred by previous chargeable
transfers made by D in the period of 7 years ending with
the date of the relevant transfer.

Step 3

5Add to the amount determined under Step 2 an amount equal to
so much of the value transferred by the relevant transfer as (in
total) is attributable to property that—

(a) forms part of that component, and

(b) is property in relation to which section 23(1) applies.

10The result is the baseline amount for that component.

Rules for determining whether charitable giving condition is met

6 (1) For the purpose of calculating the donated amount and the
baseline amount, any amount to be arrived at in accordance with
section 38(3) or (5) is to be arrived at assuming the rate of tax is the
15lower rate of tax (see paragraph 2(6)).

(2) For the purpose of calculating the donated amount, section 39A
does not apply to a specific gift of property in relation to which
section 23(1) applies (but that section does apply to such a gift for
the purpose of calculating the baseline amount).

(3) 20Subject to sub-paragraphs (1) and (2), the provisions of this Act
apply for the purpose of calculating the donated amount and the
baseline amount as for the purpose of calculating the tax to be
charged on the value transferred by the chargeable transfer.

Election to merge parts of the estate

7 (1) 25An election may be made under this paragraph if, for a component
of the estate, the donated amount is at least 10% of the baseline
amount.

(2) That component is referred to as “the qualifying component”.

(3) The effect of the election is that the qualifying component and one
30or more eligible parts of the estate (as specified in the election) are
to be treated for the purposes of this Schedule as if they were a
single component.

(4) Accordingly, if the donated amount for that deemed single
component is at least 10% of the baseline amount for it, the
35property in that component is to be included in the part of TP that
qualifies for the lower rate of tax.

(5) In relation to the qualifying component—

(a) each one of the other two components of the estate is an
“eligible part” of the estate, and

(b) 40all the property that forms part of the estate by virtue of
section 102(3) of the Finance Act 1986 (gifts with
reservation) is also an “eligible part” of the estate.

(6) The election must be made by all those who are appropriate
persons with respect to the qualifying component and each of the
eligible parts to be treated as a single component.

(7) “Appropriate persons” means—

(a) 5with respect to the survivorship component, all those to
whom the property in that component passes on D’s death
(or, if they have subsequently died, their personal
representatives),

(b) with respect to the settled property component, the
10trustees of all the settled property in that component,

(c) with respect to the general component, all the personal
representatives of D or, if there are none, all those who are
liable for the tax attributable to the property in that
component, and

(d) 15with respect to property within paragraph (b) of sub-
paragraph (5), all those in whom the property within that
paragraph is vested when the election is to be made.

Opting out

8 (1) If an election is made under this paragraph in relation to a
20component of the estate, this Schedule is to apply as if the donated
amount for that component were less than 10% of the baseline
amount for it (whether or not it actually is).

(2) The election must be made by all those who are appropriate
persons (as defined in paragraph 7(7)) with respect to the
25component.

Elections: procedure

9 (1) An election under this Schedule must be made by notice in writing
to HMRC within two years after D’s death.

(2) An election under this Schedule may be withdrawn by notice in
30writing to HMRC given—

(a) by all those who would be entitled to make such an
election, and

(b) no later than the end of the period of two years and one
month after D’s death.

(3) 35An officer of Revenue and Customs may agree in a particular case
to extend the time limit in sub-paragraph (1) or (2)(b) by such
period as the officer may allow.

General interpretation

10 In this Schedule, in relation to D—

• 40“the chargeable transfer” means the chargeable transfer
  mentioned in paragraph 1(1);

• “the estate” means D’s estate immediately before death;

• “the relevant transfer” means the transfer of value that D is
  treated (under section 4) as having made immediately
  45before death.”

Consequential amendments

2 IHTA 1984 is amended as follows in consequence of paragraph 1.

3 In section 7 (rates), in subsection (1), after “(4) and (5) below” insert “and to
Schedule 1A”.

4 5In section 33 (amount of charge under section 32), after subsection (2)
insert—

“(2ZA) In determining for the purposes of subsection (1)(b)(ii) the rate or
rates that would have applied in accordance with subsection (1) of
section 7, the effect of Schedule 1A (if it would have applied) is to be
10disregarded.”

5 In section 78 (conditionally exempt occasion), in subsection (3), for “33(3)”
substitute “33(2ZA)”.

6 In section 128 (rate of charge: woodlands)—

(a) the existing provisions become subsection (1) of that section, and

(b) 15after that subsection insert—

“(2) In determining for the purposes of subsection (1) the rate or
rates at which tax would have been charged on the amount
determined under section 127, the effect of Schedule 1A (if it
would have applied) is to be disregarded.”

7 20After section 141 insert—

“141A Apportionment of relief under section 141

(1) This section applies if any part of the value transferred by the later
transfer qualifies for the lower rate of tax in accordance with
Schedule 1A.

(2) 25The amount of the reduction made under section 141(1) is to be
apportioned in accordance with this section.

(3) For each qualifying component, the tax chargeable on so much of the
value transferred by the later transfer as is attributable to property in
that component (“the relevant part of the tax”) is to be reduced by the
30appropriate proportion of the amount calculated in accordance with
section 141(3).

(4) “The appropriate proportion” is a proportion equal to the proportion
that—

(a) the relevant part of the tax, bears to

(b) 35the tax chargeable on the value transferred by the later
transfer as a whole.

(5) If parts of an estate are treated under Schedule 1A as a single
component, subsection (3) applies to the single component (and not
to individual components forming part of the deemed single
40component).

(6) If, after making the reductions required by subsection (3), there
remains any part of the tax chargeable on the value transferred by the
later transfer that has not been reduced, the remaining part of the tax
is to be reduced by so much of the amount calculated in accordance

with section 141(3) as has not been used up for the purposes of
making the reductions required by subsection (3).

(7) In this section—

• “component” means a component of the estate, as defined in
  paragraph 3 of Schedule 1A;

• 5“the later transfer” has the meaning given in section 141(1);

• “qualifying component” means a component (or deemed single
  component) for which the donated amount is at least 10% of
  the baseline amount, as determined in accordance with
  Schedule 1A.”

8 10In Schedule 4 (maintenance funds for historic buildings etc), in paragraph
14, after sub-paragraph (2) insert—

“(2A) In determining for the purposes of sub-paragraph (2) the effective
rate or rates at which tax would have been charged on the amount
in accordance with section 7(1), the effect of Schedule 1A (if it
15would have applied) is to be disregarded.”

Instruments of variation to be notified to charities etc

9 In section 142 of IHTA 1984 (alteration of dispositions taking effect on
death), after subsection (3) insert—

“(3A) Subsection (1) does not apply to a variation by virtue of which any
20property comprised in the estate immediately before the person’s
death becomes property in relation to which section 23(1) applies
unless it is shown that the appropriate person has been notified of
the existence of the instrument of variation.

(3B) For the purposes of subsection (3A) “the appropriate person” is—

(a) 25the charity or registered club to which the property is given,
or

(b) if the property is to be held on trust for charitable purposes or
for the purposes of registered clubs, the trustees in question.”

Commencement

10 (1) 30The Schedule inserted by paragraph 1 has effect in cases where D’s death
occurs on or after 6 April 2012 (and the amendments made by paragraphs 3
to 8 are to be read accordingly).

(2) The amendment made by paragraph 9 has effect in cases where the person’s
death occurs on or after 6 April 2012.

Section 209

35SCHEDULE 33 Bank levy

Introductory

1 Schedule 19 to FA 2011 (bank levy) is amended as follows.

Rates 2012

2 In paragraph 6 (steps for determining the amount of the bank levy), in sub-
paragraph (2)—

(a) for “0.039%” substitute “0.044%”, and

(b) 5for “0.078%” substitute “0.088%”.

3 In paragraph 7 (special provision for chargeable periods falling wholly or
partly before 1 January 2012), in sub-paragraph (2)—

(a) for “0.039%” substitute “0.044%”, and

(b) for “0.078%” substitute “0.088%”.

4 10The amendments made by paragraphs 2 and 3 are treated as having come
into force on 1 January 2012.

Rates from 2013

5 In paragraph 6 (steps for determining the amount of the bank levy), in sub-
paragraph (2)—

(a) 15for “0.044%” substitute “0.0525%”, and

(b) for “0.088%” substitute “0.105%”.

6 (1) In paragraph 7 (special provision for chargeable periods falling wholly or
partly before 1 January 2012) for sub-paragraphs (1) and (2) substitute—

“(1) Paragraph 6(2) applies subject to this paragraph if some or all of
20the chargeable period falls before 1 January 2013.

(2) For Step 7 there is substituted—

“Step 7

Determine the proportion (“P%”) (if any) of the chargeable period
which falls within each of the periods (“rate periods”) specified in
25column 1 of the following table.

In relation to each rate period—

• charge P% of the amount of the long term chargeable
  equity and liabilities at the rate specified, in relation to the
  rate period concerned, in the second column of the table,
  30and

• charge P% of the amount of the short term chargeable
  liabilities at the rate specified, in relation to the rate period
  concerned, in the third column of the table.

Add together the results for each rate period in which some or all
35of the chargeable period falls to give the amount of the bank levy.

(2) Accordingly, in the italic heading immediately before that paragraph for
“2012” substitute “2013”.

7 The amendments made by paragraphs 5 and 6 come into force on 1 January
252013.

Joint ventures

8 (1) Paragraph 43 (calculation of chargeable equity and liabilities where relevant
group has an interest in a joint venture) is amended as follows.

(2) In sub-paragraph (1), for paragraphs (d) and (e) substitute “, and

“(d) 30in the absence of this paragraph, none of the liabilities
taken into account in determining the amount of the
chargeable equity and liabilities of the relevant group
would include the JV liabilities.”

(3) For sub-paragraph (2) substitute—

“(2) 35For the purposes of determining the chargeable equity and
liabilities of the relevant group under paragraph 17 or 19 (as the
case may be) the joint venture is to be treated as if—

(a) it were a member of the group in relation to—

(i) the liabilities of the joint venture which consist of
40the JV liabilities, and

(ii) the assets of the joint venture so far as determined
by the relevant interest, and

(b) it were not a member of the group in relation to the
remaining liabilities and assets of the joint venture.”

9 45In paragraph 44 (chargeable equity and liabilities of joint venture:
prevention of double charge), in sub-paragraph (7)(b), for the words from
“liabilities for” to “27(2)(a)” substitute “taken into account in calculating the

chargeable equity and liabilities of V (or where sub-paragraph (6) applies,
A)”.”

10 The amendments made by paragraphs 8 and 9 have effect in relation to
chargeable periods ending on or after 1 January 2012.

Double taxation relief

11 (1) 5In paragraph 66 (double taxation arrangements), after sub-paragraph (9)
insert—

“(9A) If arrangements specified in an order under this paragraph
provide for relief from the bank levy for periods before the order
is made, regulations under this paragraph which are made on the
10same day as the order, and come into force on the same day as the
order, may make provision in relation to those periods.”

(2) After paragraph 67 insert—

“Disclosure of information to foreign tax authorities etc

67A (1) If the Treasury by order declares that—

(a) 15international tax enforcement arrangements which are
specified in the order have been made in relation to any
territory or territories outside the United Kingdom in
association with double taxation arrangements specified
under paragraph 66 in the same or a previous order, and

(b) 20it is expedient that those international tax enforcement
arrangements have effect,

those arrangements have effect, and do so in spite of anything in
any enactment or instrument.

(2) “International tax enforcement arrangements” means
25arrangements which relate to one or both of the following—

(a) the exchange of information foreseeably relevant to the
administration, enforcement or recovery of the bank levy
or any equivalent foreign levy to which the double
taxation arrangements relate;

(b) 30the service of documents relating to the bank levy or any
such equivalent foreign levy.

(3) An order under this paragraph revoking an earlier order may
contain transitional provisions that appear to the Treasury to be
necessary or expedient.

(4) 35Subsections (4) and (5) of section 173 of FA 2006 (international tax
enforcement arrangements: disclosure of information) apply to
arrangements which have effect under this paragraph as they
apply to arrangements which have effect under that section.

(5) Orders under this paragraph are to be made by statutory
40instrument.

(6) A statutory instrument containing an order under this paragraph
is subject to annulment in pursuance of a resolution of the House
of Commons.”

(3) Accordingly, the italic heading before paragraph 68 is omitted.

Transitional provision

12 (1) This paragraph applies where—

(a) an amount of the bank levy is treated as if it were an amount of
5corporation tax chargeable on an entity (“E”) for an accounting
period of E,

(b) the chargeable period in respect of which the amount of the bank
levy is charged falls (or partly falls) on or after 1 January 2012, and

(c) under the Instalment Payment Regulations, one or more instalment
10payments, in respect of the total liability of E for the accounting
period, were treated as becoming due and payable before the
commencement date (“pre-commencement instalment payments”).

(2) Paragraphs 2 to 10 are to be ignored for the purpose of determining the
amount of any pre-commencement instalment payment.

(3) 15If there is at least one instalment payment, in respect of the total liability of
E for the accounting period, which under the Instalment Payment
Regulations is treated as becoming due and payable on or after the
commencement date (“post-commencement instalment payments”), the
amount of that instalment payment, or the first of them, is to be increased by
20the adjustment amount.

(4) If there are no post-commencement instalment payments, a further
instalment payment, in respect of the total liability of E for the accounting
period, of an amount equal to the adjustment amount is to be treated as
becoming due and payable at the end of the period of 30 days beginning
25with the commencement date.

(5) “The adjustment amount” is the difference between—

(a) the aggregate amount of the pre-commencement instalments
determined in accordance with sub-paragraph (2), and

(b) the aggregate amount of those instalment payments determined
30ignoring sub-paragraph (2) (and so taking account of paragraphs 2 to
10).

(6) In the Instalment Payment Regulations—

(a) in regulations 6(1)(a), 7(2), 8(1)(a) and (2)(a), 9(5), 10(1), 11(1) and 13,
references to regulation 4A, 4B, 4C, 4D, 5, 5A or 5B of those
35Regulations are to be read as including a reference to sub-paragraphs
(1) to (5) (and in regulation 7(2) “the regulation in question”, and in
regulation 8(2) “that regulation”, are to be read accordingly), and

(b) in regulation 9(3), the reference to those Regulations is to be read as
including a reference to sub-paragraphs (1) to (5).

(7) 40In section 59D of TMA 1970 (general rule as to when corporation tax is due
and payable), in subsection (5), the reference to section 59E is to be read as
including a reference to this paragraph.

(8) In this paragraph—

• “the chargeable period” is to be construed in accordance with
  45paragraph 4 or (as the case may be) 5 of Schedule 19 to FA 2011;

• “the commencement date” means the day on which this Act is passed;

Finance BillPage 620

• “the Instalment Payment Regulations” means the Corporation Tax
  (Instalment Payments) Regulations 1998 (S.I. 1998/3175);

and references to the total liability of E for an accounting period are to be
construed in accordance with regulation 2(3) of the Instalment Payment
5Regulations.

Section 212

SCHEDULE 34 Stamp duty land tax: higher rate for certain transactions

Introductory

1 Part 4 of FA 2003 (stamp duty land tax) is amended in accordance with
10paragraphs 2 to 9.

Higher rate of tax: main provisions

2 (1) Section 55 (amount of tax chargeable: general) is amended as follows.

(2) In subsection (1), after “chargeable transaction” insert “to which this section
applies”.

(3) 15After that subsection insert—

“(1A) This section applies to any chargeable transaction other than a
transaction to which paragraph 3 of Schedule 4A or step 4 of section
74(1A) (higher rate for certain transactions) applies.”

(4) In subsection (2), for “That percentage” substitute “The percentage
20mentioned in subsection (1)”.

(5) In subsection (5), for “74” substitute “74(2) and (3)”.

(6) In subsection (7), after “this section” insert “, step 4 of section 74(1A) or
paragraph 3 of Schedule 4A”.

3 After section 55 insert—

“55A 25Amount of tax chargeable: higher rate for certain transactions

Schedule 4A provides for the calculation of the tax chargeable in
respect of certain transactions involving higher threshold interests in
dwellings.”

4 After Schedule 4 insert—

“ Schedule 4A 30Stamp duty land tax: higher rate for certain transactions

Meaning of “higher threshold interest”

1 (1) In this paragraph “interest in a single dwelling” means so much of
the subject-matter of a chargeable transaction as consists of a
chargeable interest in or over a single dwelling (together with
35appurtenant rights).

(2) An interest in a single dwelling is a higher threshold interest for
the purposes of this Schedule if chargeable consideration of more
than £2,000,000 is attributable to that interest.

Transactions involving a higher threshold interest

2 (1) 5Sub-paragraphs (2) to (8) apply to a chargeable transaction whose
subject-matter consists of or includes a higher threshold interest.

(2) If the main subject-matter of the transaction consists entirely of
higher threshold interests, the transaction is a high-value
residential transaction for the purposes of paragraph 3.

(3) 10If the main subject-matter of the transaction includes a chargeable
interest other than a higher threshold interest, the transaction
(“the primary transaction”) is to be treated for the relevant
purposes as two separate chargeable transactions as follows—

(a) a transaction whose subject-matter is all the higher
15threshold interests, together with any appurtenant rights;

(b) a transaction whose subject-matter is the remainder of the
subject-matter of the primary transaction.

(4) For those purposes, the chargeable consideration for a transaction
treated as occurring under sub-paragraph (3) is so much of the
20chargeable consideration for the primary transaction as is
attributable to that transaction.

(5) The transaction mentioned in sub-paragraph (3)(a) is a high-value
residential transaction for the purposes of paragraph 3.

(6) “Relevant purposes” means the purposes of—

(a) 25paragraphs 3 and 5 of this Schedule,

(b) section 55 (amount of tax chargeable: general),

(c) Schedule 5 (amount of tax chargeable: rent),

(d) Schedule 6B (transfers involving multiple dwellings), and

(e) any other provision of this Part, so far as it is necessary
30because of any of paragraphs (a) to (d) to treat the purposes
in question as relevant purposes.

(7) If a transaction treated under sub-paragraph (3) as two separate
transactions is notifiable, each of the separate transactions (but not
the primary transaction) is also treated as a separate, and
35notifiable, transaction for the purposes of section 76 (duty to
deliver land transaction return).

(8) The provisions relating to land transaction returns are to be read
with any adjustments that may be necessary as a result of sub-
paragraph (7).

(9) 40The reference in sub-paragraph (1) to a chargeable transaction
does not include a transaction to which section 74 (exercise of
collective rights by tenants of flats) or section 75 (crofting
community right to buy) applies.

Amount of tax chargeable: higher rate for certain transactions

3 (1) 45Where this paragraph applies to a chargeable transaction—

(a) the amount of tax chargeable in respect of the transaction
is 15% of the chargeable consideration for the transaction,
and

(b) the transaction is not taken to be linked to any other
5transaction for the purposes of section 55(4).

(2) This paragraph applies to a chargeable transaction if—

(a) the transaction is a high-value residential transaction, and

(b) the condition in sub-paragraph (3) is met.

(3) The condition is that—

(a) 10the purchaser is a company,

(b) the acquisition is made by or on behalf of the members of
a partnership one or more of whose members is a
company, or

(c) the acquisition is made for the purposes of a collective
15investment scheme.

(4) References in sub-paragraph (3) to a company do not include a
company acting in its capacity as trustee of a settlement.

(5) If there are two or more purchasers acting jointly, the condition in
sub-paragraph (3) is treated as met if it is met in relation to at least
20one of those purchasers.

(6) In relation to a transfer of an interest in a partnership that is a
chargeable transaction by virtue of paragraph 17(2) of Schedule
15, sub-paragraph (3) has effect as if the following were
substituted for paragraph (b) of that sub-paragraph—

“(b) 25the purchasers (see paragraph 17(3) of Schedule 15)
include a company, or”.

(7) In relation to an event that is a chargeable transaction by virtue of
paragraph 17A(4) of that Schedule, sub-paragraph (3) has effect as
if the following were substituted for paragraph (b) of that sub-
30paragraph—

“(b) the purchasers (see paragraph 17A(5) of Schedule 15)
include a company, or”.

(8) For the purposes of sub-paragraph (3), paragraph 3 of Schedule 16
(bare trustees) applies as if sub-paragraphs (2) and (3) of that
35paragraph were omitted.

(9) In the case of a transaction for which the whole or part of the
chargeable consideration is rent, this paragraph has effect subject
to section 56 and Schedule 5 (amount of tax chargeable: rent).

(10) The Treasury may by order amend this paragraph for the purpose
40of limiting the circumstances in which the condition in sub-
paragraph (3) is to be treated as met.

Acquisitions of interests in the same dwelling through different transactions

4 (1) Sub-paragraphs (2) and (3) apply if—

(a) the subject-matter of a chargeable transaction includes a
45chargeable interest in or over a dwelling,

(b) one or more land transactions, the subject-matter of each of
which includes a chargeable interest in or over the
dwelling, are linked to that chargeable transaction, and

(c) the total consideration attributable to the interests
5mentioned in paragraphs (a) and (b) (and to any
appurtenant rights, but disregarding any rent) is more
than £2,000,000.

(2) Each of those chargeable interests is treated as a higher threshold
interest for the purposes of this Schedule.

(3) 10If the condition in paragraph 3(3) is met in the case of the
transaction mentioned in sub-paragraph (1)(a), it is also treated as
met in the case of each transaction mentioned in sub-paragraph
(1)(b) that is a chargeable transaction.

(4) The transactions referred to in this paragraph do not include any
15transaction to which section 74 (exercise of collective rights by
tenants of flats) or section 75 (crofting community right to buy)
applies.

Property developers

5 (1) A company is treated as not being a company for the purposes of
20paragraph 3(3)(a) if—

(a) the company acquires the subject-matter of the chargeable
transaction in the course of a bona fide property
development business and for the sole purpose of
developing and reselling the land, and

(b) 25the company has carried on that business for at least two
years before the effective date of the transaction.

(2) Where the subject-matter of a chargeable transaction is acquired
by or on behalf of the members of a partnership, those members
are taken not to include a company for the purposes of paragraph
303(3)(b) if—

(a) that subject-matter is acquired in the course of a bona fide
property development business and for the sole purpose of
developing and reselling the land, and

(b) the partnership has carried on that business for at least two
35years before the effective date of the transaction.

(3) In relation to a transfer of an interest in a partnership that is a
chargeable transaction by virtue of paragraph 17(2) of Schedule 15
(“the partnership transfer”) the purchasers are treated as not
including a company for the purposes of paragraph 3(3)(b) (as
40modified by paragraph 3(6)) if—

(a) the acquisition effected by the land transfer referred to in
paragraph 17(1)(a) of that Schedule was made in the course
of a bona fide property development business, and for the
sole purpose of developing and reselling the land, and

(b) 45the partnership is continuing to carry on that business at
the effective date of the partnership transfer, and has
carried it on for at least two years before that date.

(4) In relation to an event that is a chargeable transaction by virtue of
paragraph 17A(4) of Schedule 15 (“the qualifying event”) the
purchasers are treated as not including a company for the
purposes of paragraph 3(3)(b) (as modified by paragraph 3(7)) if—

(a) 5the acquisition effected by the land transfer referred to in
paragraph 17A(1)(a) of that Schedule was made in the
course of a bona fide property development business, and
for the sole purpose of developing and reselling the land,
and

(b) 10the partnership is continuing to carry on that business at
the effective date of the qualifying event, and has carried it
on for at least two years before that date.

(5) A property development business is a business that consists of or
includes buying, and redeveloping for resale, residential property.

(6) 15For the purposes of sub-paragraph (1)(b) a property development
business is treated as having been carried on by the company at
any time when it was carried on by a company which is a member
of the same group as the company.

(7) Companies are members of the same group for the purposes of
20this paragraph if they are members of the same group for the
purposes of group relief (see paragraph 1 of Schedule 7).

Partnerships: application of paragraph 2 to certain transactions

6 (1) Sub-paragraphs (2) and (3) apply where the subject-matter of a
transaction to which Part 3 of Schedule 15 applies consists of or
25includes a higher threshold interest.

(2) The transaction is not to be treated as a high-value residential
transaction by virtue of paragraph 2(2) unless the chargeable
consideration for the transaction is more than £2,000,000.

(3) Paragraph 2(3) to (8) does not apply to the transaction if—

(a) 30the subject-matter of the transaction includes a chargeable
interest other than a higher threshold interest, and

(b) the result of applying paragraph 2(3) and (4) would be that
chargeable consideration of £2,000,000 or less would be
attributable to the separate transaction mentioned in
35paragraph 2(3)(a).

(4) For the purposes of sub-paragraph (1) and paragraph 2, the
subject-matter (and the main subject-matter) of a transfer of an
interest in a partnership that is a chargeable transaction by virtue
of sub-paragraph (2) of paragraph 14 of Schedule 15 is—

(a) 40if the transfer is a Type A transfer, the relevant partnership
property as defined in sub-paragraph (5) of that
paragraph, or

(b) if the transfer is a Type B transfer, the relevant partnership
property as defined in sub-paragraph (5A) of that
45paragraph.

(5) For the purposes of sub-paragraph (1) and paragraph 2, the
subject-matter (and the main subject-matter) of a transfer of an

interest in a partnership that is a chargeable transaction by virtue
of sub-paragraph (2) of paragraph 17 of Schedule 15 is the subject-
matter of the land transfer referred to in sub-paragraph (1)(a) of
that paragraph.

(6) For the purposes of sub-paragraph (1) and paragraph 2, the
5subject-matter (and the main subject-matter) of a chargeable
transaction that is treated as occurring by virtue of sub-paragraph
(4) of paragraph 17A of Schedule 15 is the subject-matter of the
land transfer referred to in sub-paragraph (1)(a) of that paragraph.

Meaning of “dwelling”

7 (1) 10This paragraph sets out rules for determining what counts as a
dwelling for the purposes of this Schedule.

(2) A building or part of a building counts as a dwelling if—

(a) it is used or suitable for use as a single dwelling, or

(b) it is in the process of being constructed or adapted for such
15use.

(3) Land that is, or is to be, occupied or enjoyed with a dwelling as a
garden or grounds (including any building or structure on such
land) is taken to be part of that dwelling.

(4) Land that subsists, or is to subsist, for the benefit of a dwelling is
20taken to be part of the dwelling.

(5) The subject-matter of a transaction is also taken to include an
interest in a dwelling if—

(a) substantial performance of a contract constitutes the
effective date of that transaction by virtue of a relevant
25deeming provision,

(b) the main subject-matter of the transaction consists of or
includes an interest in a building, or a part of a building,
that is to be constructed or adapted under the contract for
use as a single dwelling, and

(c) 30construction or adaptation of the building, or part of the
building, has not begun by the time the contract is
substantially performed.

(6) In sub-paragraph (5) “contract”, “relevant deeming provision”
and “substantially performed” have the same meaning as in
35paragraph 7(5) of Schedule 6B.

(7) A building or part of a building used for a purpose specified in
section 116(2) or (3) is not used as a dwelling for the purposes of
sub-paragraph (2) or (5).

(8) Where a building or part of a building is used for a purpose
40mentioned in sub-paragraph (7), no account is to be taken for the
purposes of sub-paragraph (2) of its suitability for any other use.

8 (1) The Treasury may by order amend paragraph 7 so as to specify
cases where use of a building is to be use of a building as a
dwelling for the purposes of sub-paragraph (2) or (5) of that
45paragraph.

(2) The reference in section 116(8)(a) (power to amend section 116(2)
and (3)) to “the purposes of subsection (1)” includes a reference to
the purposes of paragraph 7(2) and (5).

Interpretation

9 5In this Schedule—

• “appurtenant rights”, in relation to a chargeable interest that
  is, or is part of, the subject-matter of a transaction, means
  any rights or interests appurtenant or pertaining to the
  chargeable interest that are acquired with it;

• 10“attributable” means attributable on a just and reasonable
  basis;

• “collective investment scheme” has the same meaning as in
  Part 17 of the Financial Services and Markets Act 2000 (see
  section 235 of that Act);

• 15“company” means a body corporate other than a
  partnership.”

Higher rate of tax: exercise of collective rights by tenants of flats

5 (1) Section 74 (exercise of collective rights by tenants of flats) is amended as
follows.

(2) 20After subsection (1) insert—

“(1A) The rate of tax is determined as follows.

(NONE) Step 1

Determine the fraction of the relevant consideration produced by
dividing the total amount of that consideration by the number of
25qualifying flats contained in the premises.

(NONE) Step 2

If the amount produced by step 1 is £2,000,000 or less, determine the
rate of tax and the tax chargeable in accordance with subsections (2)
and (3).

(NONE) 30Step 3

If the amount produced by step 1 is more than £2,000,000 and the
condition in paragraph 3(3) of Schedule 4A is not met with respect to
the transaction, determine the rate of tax and the tax chargeable in
accordance with subsections (2) and (3).

(NONE) 35Step 4

If the amount produced by step 1 is more than £2,000,000 and the
condition in paragraph 3(3) of Schedule 4A is met with respect to the
transaction, subsections (2) and (3) do not apply, and the amount of
tax chargeable in respect of the transaction is 15% of the chargeable
40consideration for the transaction.”

(3) For subsection (2) substitute—

“(2) The rate of tax is determined under section 55 by reference to the
fraction of the relevant consideration calculated under step 1 of
subsection (1A).”

Minor and consequential amendments

6 (1) Section 109 (general power to vary Part 4 of FA 2003 by regulations) is
amended as follows.

(2) After subsection (2) insert—

“(2A) 5The power under subsection (2)(b) includes power to alter the
conditions for the application to a chargeable transaction of
paragraph 3 of Schedule 4A (higher rate for certain transactions),
other than the condition that the transaction must be a high-value
residential transaction.”

(3) 10In subsection (3)—

(a) for “subsection (2)(b),” substitute “subsections (2)(b) and (2A),”,

(b) omit the “or” at the end of paragraph (a), and

(c) after that paragraph insert—

“(aa) section 74(1A) (exercise of collective rights by tenants
15of flats),

(ab) Schedule 4A (amount of tax chargeable: high-value
interests in dwellings), or”.

7 (1) Schedule 5 (amount of tax chargeable: rent) is amended as follows.