Finance (No. 2) Bill

Session 2012 - 13
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Finance (No. 2) Bill

Finance (No. 2) Bill
Schedule 39 — Stamp duty land tax on leases
465

Schedule 39
Section 195

Stamp duty land tax on leases
Introduction
1
Part 4 of FA 2003 (stamp duty land tax) is amended as follows.
Leases that continue after a fixed term
5
2     (1)
In Schedule 17A (further provisions about leases), paragraph 3 (leases that
continue after a fixed term) is amended as follows.
      (2)
In sub-paragraph (3)—
(a)
after “continuation of the lease” insert “for a period (or further
period) of one year”, and
10
(b)
in paragraph (a), for “that term” substitute “that one year period”.
      (3)
After that sub-paragraph insert—
   “(3A)
Sub-paragraph (2) is subject to paragraph 3A.”
      (4)
In sub-paragraph (4), for the words from “the day” to the end substitute “the
last day of the one year period for which the lease is continued or (as the case
15
may be) further continued.”
      (5)
After sub-paragraph (5) insert—
    “(6)
Where—
(a)
a lease would be treated as continuing for a period (or
further period) of one year under sub-paragraph (2), but
20
(b)
(ignoring that sub-paragraph) the lease actually terminates
at a time during that period,

the lease is to be treated as continuing under sub-paragraph (2)
only until that time; and the references in sub-paragraphs (3) and
(4) to that one year period are accordingly to be read as references
25
to so much of that year as ends with that time.”
3
After that paragraph insert—
“3A   (1)
This paragraph applies where—
(a)
(ignoring this paragraph) paragraph 3 would apply to
treat a lease (“the original lease”) as if it were a lease for a
30
fixed term one year longer than the original term,
(b)
during that one year period the tenant under that lease is
granted a new lease of the same or substantially the same
premises,
(c)
the term of the new lease begins during that one year
35
period, and
(d)
paragraph 9A (backdated lease granted to tenant holding
over) does not apply.
      (2)
Paragraph 3 does not apply to treat the lease as continuing after
the original fixed term.
40
      (3)
The term of the new lease is treated for the purposes of this Part as
beginning immediately after the original fixed term.

Finance (No. 2) Bill
Schedule 39 — Stamp duty land tax on leases
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      (4)
Any rent which, in the absence of this paragraph, would be
payable under the original lease in respect of that one year period
is to be treated as payable under the new lease (and paragraph 1A
of Schedule 5 does not apply to it).
      (5)
Where the fixed term of a lease has previously been extended (on
5
one or more occasions) under paragraph 3, this paragraph applies
as if references to the original term were references to the fixed
term as previously so extended.”
4
In section 87 (interest on unpaid tax), in subsection (3)—
(a)
after paragraph (aa) insert—
10
“(aaa)
in the case of an amount payable under paragraph
3(3) of Schedule 17A (leases that continue after a fixed
term) by reason of the continuation of a lease for a
period (or further period) under paragraph 3(2) or (6)
of that Schedule, the final day of the period (or further
15
period),” and
(b)
in paragraph (ab) omit “3(3) or” and “leases that continue after a
fixed term and”.
5
In section 119 (meaning of “effective date” of a transaction), in subsection (2),
at the appropriate place in the list insert—
20

“paragraph 3(4) of Schedule 17A (leases that continue after a fixed
term),”.
Agreement for lease and assignment of agreement for lease
6     (1)
Schedule 17A is amended as follows.
      (2)
In paragraph 12A (agreement for lease), for sub-paragraph (3) substitute—
25
    “(3)
Where a lease (“the actual lease”) is subsequently granted in
pursuance of the agreement, the notional lease is to be treated for
the purposes of this Part as if it were a lease granted—
(a)
on the date the agreement was substantially performed,
(b)
for a term which begins with that date and ends at the end
30
of the term of the actual lease, and
(c)
in consideration of the total rent payable over that term
and any other consideration given for the notional lease or
the actual lease.
     (3A)
Where sub-paragraph (3) applies the grant of the actual lease is
35
disregarded for the purposes of this Part except section 81A
(return or further return in consequence of later linked
transaction).
     (3B)
For the purposes of section 81A—
(a)
the grant of the notional lease and the grant of the actual
40
lease are linked (whether or not they would be linked by
virtue of section 108),
(b)
the lessee under the actual lease (rather than the lessee
under the notional lease) is liable for any tax or additional
tax payable in respect of the notional lease as a result of
45
sub-paragraph (3), and

Finance (No. 2) Bill
Schedule 39 — Stamp duty land tax on leases
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(c)
the reference in section 81A(1)(a) to “the purchaser under
the earlier transaction” is to be read, in relation to the
notional lease, as a reference to the lessee under the actual
lease.”
      (3)
In paragraph 19 (missives of let)—
5
(a)
for sub-paragraph (2) substitute—
    “(2)
Where in Scotland there is a lease constituted by concluded
missives of let (“the first lease”) and at some later time a
lease is executed (“the second lease”), the first lease is to be
treated for the purposes of this Part as if it were a lease
10
granted—
(a)
on the date the missives of let were concluded,
(b)
for a period which begins with that date and ends
at the end of the period of the second lease, and
(c)
in consideration of the total rent payable over that
15
period and any other consideration given for the
first lease or the second lease.
     (2A)
Where sub-paragraph (2) applies the grant of the second
lease is disregarded for the purposes of this Part except
section 81A (return or further return in consequence of
20
later linked transaction).
     (2B)
For the purposes of section 81A—
(a)
the grant of the first lease and the grant of the
second lease are linked (whether or not they would
be linked by virtue of section 108),
25
(b)
the lessee under the second lease (rather than the
lessee under the first lease) is liable for any tax or
additional tax payable in respect of the first lease
lease as a result of sub-paragraph (2), and
(c)
the reference in section 81A(1)(a) to “the purchaser
30
under the earlier transaction” is to be read, in
relation to the first lease, as a reference to the lessee
under the actual lease.
(b)
for sub-paragraph (4) substitute—
    “(4)
Where sub-paragraph (3) applies and at some later time a
35
lease (“the actual lease”) is executed, this Part applies as if
the notional lease were a lease granted—
(a)
on the date the agreement was substantially
performed,
(b)
for a period which begins with that date and ends
40
at the end of the period of the actual lease, and
(c)
in consideration of the total rent payable over that
period and any other consideration given for the
agreement or the actual lease.
     (4A)
Where sub-paragraph (4) applies the grant of the second
45
lease is disregarded for the purposes of this Part except
section 81A (return or further return in consequence of
later linked transaction).”
     (4B)
For the purposes of section 81A—

Finance (No. 2) Bill
Schedule 39 — Stamp duty land tax on leases
468

(a)
the grant of the notional lease and the grant of the
actual lease are linked (whether or not they would
be linked by virtue of section 108),
(b)
the lessee under the actual lease (rather than the
lessee under the notional lease) is liable for any tax
5
or additional tax payable in respect of the notional
lease as a result of sub-paragraph (4), and
(c)
the reference in section 81A(1)(a) to “the purchaser
under the earlier transaction” is to be read, in
relation to the notional lease, as a reference to the
10
lessee under the actual lease.”
      (4)
Accordingly, in Schedule 25 to FA 2006, paragraphs 4 and 5 are omitted.
Abnormal rent increases
7     (1)
In Schedule 17A, omit paragraphs 14 and 15 (abnormal increases in rent after
fifth year).
15
      (2)
Accordingly, the following are also repealed—
(a)
in Schedule 25 to FA 2006, paragraphs 7, 8 and 9(5), and
(b)
in Schedule 3 to the Scotland Act 2012, paragraph 27(9).
Commencement
8     (1)
The amendments made by paragraph 2(2), (4) and (5) have effect in relation
20
to any one year period for which a lease is continued, or further continued,
which begins on or after the commencement day (including any period
which would be one year but for paragraph 3(6) of Schedule 17A to FA
2003).
      (2)
The amendments made by paragraphs 2(3), 3 and 5 have effect if the one
25
year period mentioned in paragraph 3A(1)(b) of Schedule 17A to FA 2003
begins on or after the commencement day.
      (3)
The amendments made by paragraph 4 have effect in relation to amounts
payable in consequence of any period for which a lease is continued, or
further continued, which begins on or after the commencement day.
30
      (4)
The amendments made by paragraph 6 have effect if the effective date of the
actual lease or, as the case may be, second lease falls on or after the
commencement day.
      (5)
The amendments made by paragraph 7 have effect in relation to any increase
in rent that takes effect on or after the commencement day.
35
      (6)
“The commencement day” means the day on which this Act is passed.