(b) a chargeable interest that is derived from the higher
threshold interest.

(5) The requirements in sub-paragraph (3) do not apply in relation to
times when, because of a change of circumstances that is
5unforeseen and beyond the purchaser’s control, it is not
reasonable to expect those requirements to be met.

(6) Sub-paragraph (7) applies if at some time in the control period a
requirement in sub-paragraph (3)—

(a) has not begun to be met, or

(b) 10has ceased to be met.

(7) The requirement is treated as being met if reasonable steps are
being taken to ensure that the requirement begins to be met, or is
again met.”

(5) After paragraph 6 insert—

15“Modifications for cases involving alternative finance arrangements

6A (1) This paragraph applies where—

(a) section 71A (land sold to financial institution and leased to
person), section 72 (land sold in Scotland sold to financial
institution and leased to person) or section 73 (land sold to
20financial institution and re-sold to person) applies, and

(b) the major interest in land purchased under the first
transaction consists of or includes a higher threshold
interest.

(2) In this paragraph “the first transaction” means—

(a) 25where section 71A applies, the transaction mentioned in
section 71A(1)(a);

(b) where section 72 applies, the transaction mentioned in
section 72(1)(a);

(c) where section 73 applies, the transaction mentioned in
30section 73(1)(a)(i).

(3) The condition in paragraph 3(3) is treated as being met with
respect to the first transaction only if that condition is met with
respect to the second transaction.

(4) If the second transaction would qualify for relief under any of
35paragraphs 5(1), 5B(1), 5D(1) and 5F(1) (disregarding the
exemptions in sections 71A(3), 72(3) and 73(3) and assuming, for
this purpose, that the subject-matter of the second transaction is a
higher threshold interest), the first transaction is taken to qualify
for relief under the same provision (and accordingly paragraph 3
40does not apply in relation to the first transaction).

(5) The first transaction does not qualify for relief under any of
paragraphs 5(1), 5B(1), 5D(1) or 5F(1) except in accordance with
sub-paragraph (4).

(6) In this paragraph “the second transaction” has the same meaning
45as in section 71A, 72 or 73 (as the case requires).

6B (1) This paragraph applies where section 72A (land in Scotland sold
to financial institution and person in common) applies and the
major interest in land purchased under the transaction mentioned
in section 72A(1)(a) (“the first transaction”) consists of or includes
5a higher threshold interest.

(2) In determining whether or not the first transaction meets the
condition in paragraph 3(3) it is to be assumed that the financial
institution referred to in section 72A(1) is not one of the persons
acquiring the major interest in land under that transaction.

(3) 10Paragraphs 5 to 5F have effect in relation to the first transaction as
they would have effect if the financial institution were not a
purchaser under that transaction.

Paragraphs 6A and 6B: application where transaction is split under paragraph 2(3)

6C (1) Where paragraph 6A or 6B (“the modifying paragraph”) applies
15and the first transaction (within the meaning of that paragraph) is
treated under paragraph 2(3) as two separate chargeable
transactions, references in the modifying paragraph to the first
transaction include those separate transactions.

(2) If the subject-matter of the second transaction (within the meaning
20of paragraph 6A) includes a chargeable interest other than a
higher threshold interest, that fact is ignored in determining for
the purposes of paragraph 6A—

(a) whether that transaction meets the condition in paragraph
3(3), or

(b) 25whether it would qualify for relief under any of
paragraphs 5(1), 5B(1), 5D(1) and 5F(1).

Alternative finance arrangements: withdrawal of relief

6D (1) This paragraph applies where relief under paragraph 5
(businesses of letting, trading in or developing properties) has
30been allowed, in accordance with paragraph 6A(4) or 6B(3), with
respect to the purchase of a major interest in land.

(2) The relief is withdrawn if at any time in the period of three years
beginning with the effective date of the first transaction (“the
control period”) a relevant requirement is not met.

(3) 35The relevant requirements are that—

(a) any relevant interest (see sub-paragraphs (5) and (6)) held
by the relevant person is held by that person exclusively
for one or more of the purposes mentioned in paragraph
5(1), and

(b) 40(if a relevant interest is held by the relevant person) no
non-qualifying individual is permitted to occupy the
dwelling.

(4) For the purposes of sub-paragraph (3)(a) and (b) it does not matter
whether the relevant interest is held by the relevant person—

(a) 45jointly or (in Scotland) in common, or

(b) otherwise.

(5) In relation to relief allowed in accordance with sub-paragraph
6A(4), “relevant interest” means any of the following—

(a) the interest acquired under the second transaction (within
the meaning of paragraph 6A);

(b) 5any interest transferred to the relevant person as a result of
the exercise of the right mentioned in section 71A(1)(d) or
72(1)(c);

(c) any chargeable interest derived from an interest such as is
mentioned in paragraph (a) or (b).

(6) 10In relation to relief allowed in accordance with paragraph 6B(3),
“relevant interest” means any of the following—

(a) the interest purchased under the first transaction (within
the meaning of paragraph 6B);

(b) any interest transferred to the relevant person as a result of
15the exercise of the right mentioned in section 72A(1)(c);

(c) any chargeable interest derived from an interest such as is
mentioned in paragraph (a) or (b).

(7) In this paragraph—

• “non-qualifying individual” (in relation to the chargeable
  20transaction mentioned in sub-paragraph (1)) has the
  meaning given by paragraph 5A;

• “the relevant person” means the person (other than the
  financial institution) who entered into the arrangements in
  question as mentioned in section 71A(1), 72(1), 72A(1) or
  2573(1).

6E (1) The requirement in paragraph 6D(3)(a) does not apply in relation
to times when, because of a change of circumstances that is
unforeseen and beyond the relevant person’s control, it is not
reasonable to expect the interest in question to be held for the
30purpose for which the relevant person acquired that person’s
initial interest.

(2) Sub-paragraph (3) applies if the relevant person’s initial interest
was acquired by the relevant person for a purpose mentioned in
paragraph 5(1), but at some time in the control period the activity
35in question (for instance, exploitation as mentioned in paragraph
5(1)(a))—

(a) has not begun in the case of a relevant interest, or

(b) has ceased in the case of a relevant interest.

(3) For the purposes of paragraph 6D(3)(a) the relevant interest is
40taken to be held for the purpose in question only if reasonable
steps are being taken to ensure that the purpose in question is
carried out.

(4) In this paragraph—

(a) “the control period”, “relevant interest” and “the relevant
45person” have the same meaning as in paragraph 6D;

(b) references to the relevant person’s “initial interest” are to
the interest mentioned in sub-paragraph (5)(a) or (6)(a) of
paragraph 6D (as the case requires).

6F (1) This paragraph applies where relief under paragraph 5B (trades
involving making a dwelling open to the public) has been allowed,
in accordance with paragraph 6A(4) or 6B(3), with respect to the
purchase of a major interest in land.

(2) 5The relief is withdrawn if at any time in the period of three years
beginning with the effective date of the first transaction (“the
control period”) the requirement in sub-paragraph (3) is not met.

(3) The requirement is that the dwelling is being exploited as a source
of income in the course of a qualifying trade.

(4) 10The requirement in sub-paragraph (3) does not apply in relation to
times when, because of a change of circumstances that is
unforeseen and beyond the relevant person’s control, it is not
reasonable to expect the interest in question to be exploited as
mentioned in that sub-paragraph.

(5) 15Sub-paragraph (6) applies if at some time in the control period that
person—

(a) has not begun to exploit the interest as a source of income
in the course of a relevant trade, or

(b) has ceased so to exploit it.

(6) 20The requirement in sub-paragraph (3) is treated as being met if
reasonable steps are being taken to ensure that the relevant
interest begins to be exploited as mentioned in that sub-
paragraph, or that such exploitation of the interest is resumed.

(7) In this paragraph—

(a) 25“the relevant person” means the person (other than the
financial institution) who enters into the arrangements
mentioned in section 71A(1), 72(1), 72A(1) or 73(1);

(b) references to a major interest in land include an undivided
share in a major interest in land.

6G (1) 30This paragraph applies where relief under paragraph 5D
(dwellings for occupation by certain employees etc) has been
allowed, in accordance with paragraph 6A(4) or 6B(3), with
respect to the purchase of a major interest in land.

(2) The relief is withdrawn if at any time in the control period when
35the relevant person holds a relevant interest (whether jointly, or in
common, or otherwise) any requirement in sub-paragraph (4) is
not met.

(3) In sub-paragraph (2) “the control period” means the three years
beginning with the effective date of the first transaction.

(4) 40The requirements are that—

(a) the relevant person, or a relevant group member, carries
on a qualifying trade,

(b) the dwelling is made available as mentioned in paragraph
5D(2)(a), and

(c) 45the dwelling is made so available for purposes that are
solely or mainly purposes of the trade mentioned in sub-
paragraph (a).

(5) The requirements in sub-paragraph (4) do not apply in relation to
times when, because of a change of circumstances that is
unforeseen and beyond the relevant person’s control, it is not
reasonable to expect those requirements to be met.

(6) 5Sub-paragraph (7) applies if at some time in the control period the
relevant interest—

(a) has not begun to be made available as mentioned in sub-
paragraph (4)(b) and (c), or

(b) has ceased to be so made available.

(7) 10The requirements in paragraphs (b) and (c) of sub-paragraph (4)
are treated as being met if reasonable steps are being taken to
ensure that the dwelling will begin to be, or will return to being,
made available as mentioned in those paragraphs.

(8) Where the relevant person is a company, “relevant group
15member” means a company which is a member of the same group
of companies as the relevant person for the purposes mentioned in
paragraph 1(2) of Schedule 7.

(9) In this paragraph—

(a) “relevant interest” has the same meaning as in paragraph
206D;

(b) “the relevant person” means the person (other than the
financial institution) who enters into the arrangements
mentioned in section 71A(1), 72(1), 72A(1) or 73(1);

(c) references to a major interest in land include an undivided
25share in a major interest in land.

6H (1) This paragraph applies where relief under paragraph 5F
(farmhouses) has been allowed, in accordance with paragraph
6A(4) or 6B(3), in relation to the purchase of a major interest in
land.

(2) 30The relief is withdrawn if at any time in the control period when
the relevant person holds a relevant interest (whether jointly, or in
common, or otherwise) any requirement in sub-paragraph (4) is
not met.

(3) In sub-paragraph (2) “the control period” means the three years
35beginning with the effective date of the first transaction.

(4) The requirements are that—

(a) the land mentioned in paragraph 5F(2) is occupied for the
purposes of a qualifying trade of farming, and

(b) the dwelling is occupied for the purposes of that trade by
40a qualifying farm worker.

(5) The requirements in sub-paragraph (4) do not apply in relation to
times when, because of a change of circumstances that is
unforeseen and beyond the relevant person’s control, it is not
reasonable to expect those requirements to be met.

(6) 45Sub-paragraph (7) applies if at some time in the control period a
requirement in sub-paragraph (4)—

(a) has not begun to be met, or

(b) has ceased to be met.

(7) The requirement is treated as being met if reasonable steps are
being taken to ensure that the requirement begins to be met, or is
again met.

(8) 5In this paragraph—

(a) “the relevant interest” has the same meaning as in
paragraph 6D;

(b) “the relevant person” means the person (other than the
financial institution) who enters into the arrangements
10mentioned in section 71A(1), 72(1), 72A(1) or 73(1);

(c) references to a major interest in land include an undivided
share in a major interest in land.”

(6) In paragraph 9 (interpretation), at the appropriate places insert—

• ““financial institution” has the same meaning as in sections 71A
  15to 73B (see section 73BA);”

• ““property development trade” has the meaning given by
  paragraph 5(3);”

• ““property rental business” has the meaning given by section
  131(4) of the Finance Act 2013;”

• 20““property trading business” has the meaning given by
  paragraph 5(3);”

• ““qualifying farm worker” has the meaning given by paragraph
  5F(4);”

• ““qualifying trade” has the meaning given by paragraph 5B(3);”

• 25““qualifying trade of farming” has the meaning given by
  paragraph 5F(5);”.

Minor and consequential amendments

3 (1) Section 81 (further return where relief withdrawn) is amended as follows.

(2) After subsection (1) insert—

“(1A) 30Where relief is withdrawn to any extent under any of paragraphs 5G
to 5K of Schedule 4A (higher rate for certain transactions) the
purchaser must deliver a further return before the end of the period
of 30 days after the relevant date.

(1B) In subsection (1A) “the relevant date” means—

(a) 35in the case of relief under paragraph 5 of Schedule 4A
(businesses of letting, trading in or redeveloping properties),
the first day in the period mentioned in paragraph 5G(2) on
which a requirement under paragraph 5G(3) was not met in
the case of the chargeable interest in question;

(b) 40in the case of relief under paragraph 5B of that Schedule
(trades involving making a dwelling available to the public),
the first day in the period mentioned in paragraph 5H(2) on
which a requirement under paragraph 5H(3) was not met in
the case of the chargeable interest in question;

(c) 45in the case of relief under paragraph 5C of that Schedule
(financial institutions acquiring dwellings in the course of
lending), the first day in the period mentioned in paragraph

5I(2) on which a requirement under paragraph 5I(3) was not
met in the case of the chargeable interest in question;

(d) in the case of relief under paragraph 5D of that Schedule
(dwellings for occupation by certain employees etc), the first
5day in the period mentioned in paragraph 5J(2) on which a
requirement under paragraph 5J(3) was not met in the case of
the chargeable interest in question;

(e) in the case of relief under paragraph 5F of that Schedule
(farmhouses), the first day in the period mentioned in
10paragraph 5K(2) on which a requirement under paragraph
5K(3) was not met in the case of the chargeable interest in
question.”

(3) In subsection (2A), for “Tax” substitute “Where subsection (1) applies any
tax”.

(4) 15In subsection (3) for “this section” substitute “subsection (1)”.

(5) After subsection (4) insert—

“(5) The provisions of Schedule 10 apply to a return under subsection
(1A) as they apply to a return under section 76, but with the
adaptation that references to the effective date of the transaction are
20to be read as references to the relevant date (as defined in subsection
(1B)).”

4 After section 81 insert—

“81ZA Alternative finance arrangements: return where relief withdrawn

(1) Where relief given in respect of a transaction entered into under
25alternative finance arrangements is withdrawn to any extent under
any of paragraphs 6D, 6F, 6G or 6H of Schedule 4A (higher rate of
tax: alternative finance arrangements)—

(a) the relevant person must deliver a return to HMRC before the
end of the period of 30 days after the date of the disqualifying
30event;

(b) the return must contain a self-assessment of the additional
tax chargeable as a result of the withdrawal of the relief;

(c) the tax so chargeable is calculated by reference to the rates in
force at the effective date of the transaction in respect of
35which the relief was allowed.

(2) The provisions of Schedule 10 (returns, enquiries, assessments and
other matters) apply to a return under this section as they apply to a
return under section 76 (general requirement to make land
transaction return), but with the following adaptations—

(a) 40references to the effective date of the transaction are to be
read as references to the date of the disqualifying event;

(b) references to the purchaser are to be read as references to the
relevant person so far as that is necessary as a result of
subsection (1) of this section or section 85(3) (payment of
45additional tax by relevant person where relief withdrawn).

(3) In this section “the date of the disqualifying event” means the first
day in the control period on which a relevant requirement was not
met.

(4) In subsection (3) “relevant requirement” means—

(a) where the relief was given under paragraph 5 of Schedule 4A
(businesses of letting, trading in or redeveloping properties),
a requirement under paragraph 5G(3) of that Schedule;

(b) 5where the relief was given under paragraph 5B of that
Schedule (trades involving making a dwelling available to
the public), a requirement under paragraph 5H(3) of that
Schedule;

(c) where the relief was given under paragraph 5C of that
10Schedule (financial institutions acquiring dwellings in the
course of lending), a requirement under paragraph 5I(3) of
that Schedule;

(d) where the relief was given under paragraph 5D of that
Schedule (dwellings for occupation by certain employees
15etc), a requirement under paragraph 5J(3) of that Schedule;

(e) where the relief was given under paragraph 5F of that
Schedule (farmhouses), a requirement under paragraph
5K(3) of that Schedule.

(5) In subsection (3) “the control period” has the same meaning as in
20paragraph 5G, 5H, 5I, 5J or 5K (as the case requires) of Schedule 4A.

(6) In this section—

• “alternative finance arrangements” means any arrangements
  such as are mentioned in section 71A, 72, 72A or 73;

• “the relevant person” means the person (other than the financial
  25institution) who entered into the arrangements in question.”

5 In section 85 (liability for tax), after subsection (2) insert—

“(3) Where relief given in respect of a transaction entered into under
alternative finance arrangements is withdrawn to any extent under
any of paragraphs 6D, 6F, 6G and 6H of Schedule 4A (higher rate:
30alternative finance arrangements)—

(a) subsection (1) does not apply in relation to the additional tax
payable as a result of the withdrawal of the relief, and

(b) the relevant person is liable to pay that additional tax.

(4) In subsection (3) “the relevant person” means the person (other than
35the financial institution) who entered into the arrangements in
question.”

(2A) Tax payable as a result of a withdrawal of relief under any of
paragraphs 6D, 6F, 6G and 6H of Schedule 4A (higher rate:
40alternative finance arrangements) must be paid not later than the
filing date for the return relating to the withdrawal (see section
81ZA(1)).”

7 In the table in section 122 (index of defined expressions), in second column
of the entry for “settlement”, after “paragraph 1(1)” insert “(except as
45otherwise expressly provided)”.

Application of amendments

8 The amendments made by paragraphs 1 to 7 have effect in relation to
transactions with an effective date on or after the day on which this Act is
passed.

5Transactions to which section 29 of the Scotland Act 2012 applies

9 (1) In relation to transactions in relation to which section 29 of the Scotland Act
2012 (disapplication of UK stamp duty land tax) has effect, FA 2003 as
amended by this Schedule has effect subject to the following further
amendments.

(2) 10In section 81ZA, in subsection (6), in the definition of “alternative finance
arrangements”, omit “72, 72A”.

(3) In Schedule 4A—

(a) in paragraph 6A—

(i) in sub-paragraph (1)(a), omit “section 72 (land in Scotland
15sold to financial institution and leased to person)”,

(ii) omit sub-paragraph (2)(b),

(iii) in sub-paragraph (4), omit “, 72(3)”, and

(iv) in sub-paragraph (6), omit “, 72”,

(b) omit paragraph 6B,

(c) 20in paragraph 6C—

(i) in sub-paragraph (1), omit “or 6B (“the modifying
paragraph”)” and for “in the modifying paragraph”
substitute “in paragraph 6A”, and

(ii) accordingly, in the heading omit “and 6B”,

(d) 25in paragraph 6D—

(i) in sub-paragraph (1), omit “or 6B(3)”,

(ii) in sub-paragraph (3)(a), omit “and (6)”,

(iii) in sub-paragraph (5)(b), omit “or 72(1)(c)”,

(iv) omit sub-paragraph (6), and

(v) 30in sub-paragraph (7), in the definition of “relevant person”,
omit “, 72(1), 72A(1)”,

(e) in paragraph 6E(4)(b), for “sub-paragraph (5)(a) or (6)(a) of
paragraph 6D (as the case requires)” substitute “paragraph 6D(5)(a)”,

(f) in paragraph 6F—

(i) 35in sub-paragraph (1), omit “or 6B(3)”, and

(ii) in sub-paragraph (7)(b), omit “, 72(1), 72A(1)”,

(g) in paragraph 6G—

(i) in sub-paragraph (1), omit “or 6B(3)”, and

(ii) in sub-paragraph (9)(b), omit “72(1), 72A(1)”, and

(h) 40in paragraph 6H—

(i) in sub-paragraph (1), omit “or 6B(3), and

(ii) in sub-paragraph (8)(b), omit “72(1), 72A(1)”.

Section 195

SCHEDULE 39 Stamp duty land tax on leases

Introduction

1 Part 4 of FA 2003 (stamp duty land tax) is amended as follows.

5Leases that continue after a fixed term

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
10period) of one year”, and

(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
15last day of the one year period for which the lease is continued or (as the case
may be) further continued.”

(5) After sub-paragraph (5) insert—

“(6) Where—

(a) a lease would be treated as continuing for a period (or
20further period) of one year under sub-paragraph (2), but

(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
25(4) to that one year period are accordingly to be read as references
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
30treat a lease (“the original lease”) as if it were a lease for a
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) 35the term of the new lease begins during that one year
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
40the original fixed term.

(3) The term of the new lease is treated for the purposes of this Part as
beginning immediately after the original fixed term.