Finance (No. 2) Bill (HC Bill 154)

(2) In this section “the initial charged amount” means the amount of tax charged
under section 96 for the period in respect of the interest.

(3) Subsection (4) applies where—

(a) tax is charged for a chargeable period with respect to a single-dwelling
5interest,

(b) the adjusted chargeable amount is less than the initial charged amount,
and

(c) a claim for relief is made under this subsection.

(4) The amount of tax charged for the period with respect to the interest is taken
10to be reduced (at the end of the chargeable period) to the adjusted chargeable
amount.

(5) Relief under subsection (3) must be claimed—

(a) in an annual tax on enveloped dwellings return, or

(b) by amending an annual tax on enveloped dwellings return.

(6) 15The claim must be delivered by the end of the chargeable period following the
one to which the claim relates.

(7) Relief under subsection (3) may be given by repayment of tax or otherwise.

(8) See also section 158 (return of adjusted amount chargeable); and see section
161(3) for provision about payment of additional tax by reference to the
20adjusted chargeable amount.

Chargeable interests and “single-dwelling interest”

104 Chargeable interests

(1) In this Part “chargeable interest” means—

(a) an estate, interest, right or power in or over land in the United
25Kingdom, or

(b) the benefit of an obligation, restriction or condition affecting the value
of any such estate, interest, right or power.

(2) Where two or more persons are jointly entitled to a chargeable interest the
chargeable interest is not regarded, for the purposes of this Part, as consisting
30of separate interests corresponding to the shares (if any) that those persons
have by virtue of their joint entitlement.

(3) An exempt interest is not a chargeable interest for the purposes of this Part.

(4) The following are exempt interests—

(a) any security interest;

(b) 35a licence to use or occupy land;

(c) in England and Wales or Northern Ireland, a tenancy at will.

(5) In subsection (4) “security interest” means an interest or right (other than a
rentcharge) held for the purpose of securing the payment of money or the
performance of any other obligation.

(6) 40In the application of this Part in Scotland the reference in subsection (5) to a
rentcharge is to be read as a reference to a feu duty or a payment mentioned in
section 56(1) of the Abolition of Feudal Tenure etc (Scotland) Act 2000 (asp 5)2000 (asp 5).

(7) The Treasury may by regulations provide that any other description of interest
or right in or over a dwelling is an exempt interest.

105 Meaning of “single-dwelling interest”

(1) References in this Part to a “single-dwelling interest” are to be read in
5accordance with this section.

(2) A chargeable interest that is exclusively in or over land consisting (on any day)
of a single dwelling is a single-dwelling interest (on that day).

(3) Where a person is entitled to a chargeable interest that is exclusively in or over
land consisting (on any day) of two or more single dwellings—

(a) 10provisions referring to a “single-dwelling interest” operate as if the
person had (on that day) a separate chargeable interest in or over each
dwelling, and

(b) the chargeable interest in or over each dwelling is therefore a single-
dwelling interest.

(4) 15Where a person is entitled to a chargeable interest in or over land that on any
day consists of one or more single dwellings and non-residential land—

(a) provisions referring to a “single-dwelling interest” operate as if the
person had (on that day) a separate chargeable interest in or over each
dwelling and a further separate chargeable interest in or over the non-
20residential land, and

(b) the chargeable interest in or over each dwelling is therefore a single-
dwelling interest.

(5) A single-dwelling interest is referred to as a single-dwelling interest “in” the
dwelling concerned.

(6) 25A single-dwelling interest in one dwelling is distinct from any single-dwelling
interest in another dwelling, even if the dwellings stand successively on the
same land.

(7) In this section—

(a) “non-residential land” means land that is not a dwelling or part of a
30dwelling;

(b) references to a dwelling include a part of a dwelling.

106 Different interests held in the same dwelling

(1) Subsection (2) applies if on one or more days in a chargeable period—

(a) a company is entitled to two or more single-dwelling interests in the
35same dwelling, or

(b) two or more single-dwelling interests in the same dwelling are held for
the purposes of the same collective investment scheme.

(2) This Part has effect with respect to that chargeable period as if those separate
interests constituted just one single-dwelling interest, the taxable value of
40which on any day is the sum of the taxable values of the separate interests.

(3) In calculating the taxable values of the separate interests for the purposes of
subsection (2), the market value of each interest is determined, under the
provisions of TCGA 1992 applied by section 95(8), on the assumption that the

other interest or interests are placed on the open market with that interest (on
the valuation date appropriate to that interest).

107 Interests held by connected persons

(1) If on any day a company (“C”) is entitled to a single-dwelling interest in a
5dwelling and another person (“P”) who is connected with C is entitled to a
different single-dwelling interest in the same dwelling, this Part has effect—

(a) in relation to C as if C were on that day entitled to P’s single-dwelling
interest as well as C’s single-dwelling interest, and

(b) (if P is a company) in relation to P as if P were on that day entitled to
10C’s single-dwelling interest as well as P’s single-dwelling interest.

(2) If on any day a single-dwelling interest (“the scheme interest”) is held for the
purposes of a collective investment scheme and a person (“P”) who is
connected with the scheme is entitled to a different single-dwelling interest in
the same dwelling, this Part has effect—

(a) 15in relation to the scheme, as if both those separate interests were on that
day held for the purposes of the scheme, and

(b) (if P is a company) in relation to P as if P were (on that day) entitled to
the scheme interest as well as P’s single-dwelling interest.

(3) If on any day a single-dwelling interest in a dwelling is held for the purposes
20of a collective investment scheme (“the first scheme”) and another interest in
the same dwelling is held for the purposes of another collective investment
scheme (“the second scheme”) that is connected with the first scheme, this Part
has effect—

(a) in relation to the first scheme, as if both the interests were held for the
25purposes of that scheme, and

(b) in relation to the second scheme, as if both interests were held for the
purposes of that scheme.

(4) See also—

(a) section 94, for provision about the liability to tax of persons treated
30under this section (read with section 101) as jointly entitled to a single-
dwelling interest;

(b) paragraph 56 of Schedule 31, for provision about returns in cases
involving joint entitlement.

(5) The provisions mentioned in subsection (4) are to be read as including
35corresponding provision for cases where the same single-dwelling interest is
treated under this section as held—

(a) for the purposes of different collective investment schemes, or

(b) by a company and for the purposes of a collective investment scheme.

108 Sections 106 and 107: superior and inferior interests

40Where a company and an individual connected with the company are on any
day entitled to single-dwelling interests in the same dwelling, section 107(1)
does not apply if—

(a) the company’s interest is a freehold or leasehold interest the taxable
value of which is £500,000 or less, and

(b) 45the individual’s interest is a leasehold interest that is inferior to the
company’s interest.

109 Different interests held in the same dwelling: effect of reliefs etc

(1) References in section 107 to a person do not include—

(a) a public body, as defined in section 151,

(b) a body listed in section 152(2) (bodies established for national
5purposes).

(2) Subsections (1) to (3) of section 107 do not apply in relation to a single-dwelling
interest if the day in question is relievable with respect to that interest by virtue
of—

(a) section 148 (charitable companies),

(b) 10section 150 (providers of social housing), or

(c) section 153 (property conditionally exempt from inheritance tax).

(3) Subsection (4) applies where the separate interests (the “relevant interests”)
that under section 107 (or that section and section 106) are treated as
constituting, on a day, just one single-dwelling interest (“the combined
15interest”) include—

(a) a freehold or leasehold interest, and

(b) a leasehold interest (“the inferior interest”) granted out of that interest.

(4) If the inferior interest is the most inferior relevant interest, the combined
interest, and the dwelling itself (where relevant), are regarded for the purposes
20of the relevant relieving provisions as being exploited, on the day mentioned
in subsection (3), in the way the inferior interest is exploited on that day.

(5) If the inferior interest is an interest in part only (“the sub-let part”) of the land
that is the subject-matter of the combined interest, subsection (4) has effect in
relation to the combined interest only so far as that interest relates to the sub-
25let part.

(6) In this section “the relevant relieving provisions” means sections 130 to 150.

(7) The inferior interest counts as “the most inferior relevant interest” if no
relevant interest (see subsection (3)) is a leasehold interest granted out of it.

(8) In this section the reference to a leasehold interest includes the interest of a
30lessee under an agreement for a lease.

(9) In the application of this section to Scotland—

(a) the reference to a freehold interest is to the interest of the owner;

(b) the reference to a leasehold interest is to a tenant’s right over or interest
in property subject to a lease;

(c) 35the reference to an agreement for lease includes missives of let.

Meaning of “dwelling”

110 Meaning of “dwelling”

(1) A building or part of a building counts as a dwelling at any time when—

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

(b) 40it is in the process of being constructed or adapted for such use.

(2) Land that is, or is at any time intended 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 at that time.

(3) Land that subsists, or is at any time intended to subsist, for the benefit of a
dwelling is taken to be part of the dwelling at that time.

(4) A building, or part of a building, used for a purpose specified in section 116(2)
or (3) of FA 2003 is not used as a dwelling for the purposes of subsection (1).

(5) 5Where a building, or part of a building, is used for a purpose mentioned in
subsection (4), no account is to be taken for the purposes of subsection (1) of its
suitability for any other use.

(6) If a building or part of a building becomes temporarily unsuitable for use as a
dwelling for any reason (including accidental damage, repairs or any other
10physical change to the building or its environment), that temporary
unsuitability is ignored in determining whether or not the building or part of
a building is, during the period in question, a dwelling for the purposes of this
Part.

This subsection does not affect any of the provisions in sections 124 to 129.

15This subsection does not affect any of the provisions in sections 124 to 129.

111 Substantial performance of “off plan” purchase

(1) Subsection (2) applies where—

(a) a contract is entered into for the acquisition of a chargeable interest in
or over land that consists of or includes a building, or part of a building,
20that is to be constructed or adapted for use as a single dwelling,

(b) substantial performance is treated as constituting the acquisition of the
chargeable interest (under section 120), and

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

(2) 25The chargeable interest deemed to be acquired as mentioned in subsection
(1)(b) is taken to be in or over land that consists of or (as appropriate) includes
a dwelling.

(3) If at any time after the substantial performance of the contract the obligation
under the contract to carry out the construction or adaptation ceases to have
30effect without the construction or adaptation having been begun, subsection
(2) ceases to apply at that time.

(4) A building or part of a building used for a purpose specified in section 116(2)
or (3) of FA 2003 is not used as a dwelling for the purposes of subsection (1).

(5) In this section—

• 35“contract” includes any agreement (including, in the case of Scotland,
  missives of let not constituting a lease);

• “substantially performed” has the same meaning as in section 44 of FA
  2003.

112 Power to modify meaning of “use as a dwelling”

(1) 40The Treasury may by order amend this Part so as to specify cases where use of
a building is to be use of a building as a dwelling for the purposes of section
110(1) or 111(1).

(2) The reference in section 116(8)(a) of FA 2003 (power to amend section 116(2)
and (3)) to “the purposes of subsection (1)” includes a reference to the purposes
45of sections 110(1) and 111(1).

113 Parts of a greater whole

(1) The fact that a part of a building is suitable for use as a dwelling does not
prevent that part from forming part of a larger single dwelling.

(2) The fact that a building or structure that is—

(a) 5in the garden or grounds of a dwelling, and

(b) occupied or enjoyed with the dwelling,

is itself suitable for use as a single dwelling does not prevent it from being
treated (in accordance with section 110(2)) as part of the dwelling.

114 Dwelling in grounds of another dwelling

(1) 10Subsection (4) applies where the conditions in subsection (2) are met in relation
to two dwellings (the “main dwelling” and the “associated dwelling”) on a day
(“the day in question”) in a chargeable period.

(2) The conditions are that—

(a) the main dwelling has a garden or grounds,

(b) 15the associated dwelling stands within the garden or grounds of the
main dwelling, but is not occupied or enjoyed with that dwelling,

(c) the associated dwelling does not have separate access, and is not part
of the same building as the main building, and

(d) the common ownership condition is met.

(3) 20The common ownership condition is that—

(a) a company is entitled to a chargeable interest in the main dwelling, and
the company or a person connected with the company is entitled to a
chargeable interest in the associated dwelling, or

(b) a chargeable interest in the main dwelling is held for the purposes of a
25collective investment scheme, and a chargeable interest in the
associated dwelling is held for the purposes of the same collective
investment scheme.

(It does not matter whether or not the interest in the main dwelling and the
interest in the associated dwelling are held for the same title.)

(4) 30This Part has effect in relation to the interests mentioned in paragraph (a) or (as
the case may be) (b) of subsection (3) as if the main dwelling and the associated
dwelling were, on the day in question, suitable for use as a single dwelling.

(5) Subsection (4) does not apply if the day in question is, in relation to the interest
in the main dwelling or the interest in the associated dwelling, relievable by
35virtue of a provision mentioned in subsection (6).

(6) Those provisions are—

(a) section 131 (property rental businesses);

(b) section 132 (rental property: preparation for sale etc);

(c) section 135 (dwellings opened to the public);

(d) 40section 136 (property developers);

(e) section 137 (property developers: exchange of dwellings);

(f) section 139 (property traders);

(g) section 141 (financial institutions acquiring dwellings in the course of
lending);

(h) 45section 143 (occupation by certain employees or partners);

(i) section 146 (farmhouses);

(j) section 148 (charitable companies);

(k) section 150 (providers of social housing).

(7) The reference in subsection (3)(a) to a person connected with the company does
5not include a public body (as defined in section 151) or a body listed in section
152(2) (bodies established for national purposes).

(8) The reference in subsection (3)(b) to a chargeable interest being held for the
purposes of the same collective investment scheme includes a reference to a
person connected with the scheme being entitled to the interest.

(9) 10The associated dwelling has “separate access” only if—

(a) there is access to the associated dwelling directly from a highway (in
Scotland, a road) that the dwelling adjoins, or

(b) the person entitled to possession of the associated dwelling has access
to that dwelling from a highway (in Scotland, a road), exclusively by
15passing over land that the person is entitled to pass over by reason of
one or more rights of way or other interests in land to which the person
is separately entitled.

(10) In this section—

• in relation to a dwelling or dwellings, references to the “garden or
  20grounds” are to land occupied or enjoyed with the dwelling or
  dwellings as a garden or grounds;

• references to the person entitled to possession of a dwelling are to the
  person entitled to possession of the dwelling by reason of an estate or
  interest held by that person;

• 25“separately entitled” means entitled otherwise than by reason of a
  chargeable interest in or over the main dwelling.

115 Dwellings in the same building

(1) Two parts of a building are “linked dwellings” if—

(a) each of them counts as a dwelling,

(b) 30there is private access between the two dwellings,

(c) the two parts of the building are not (together) used or suitable for use
as a single dwelling, and

(d) the common ownership condition and the use condition are met.

(2) The common ownership condition is that—

(a) 35a company is entitled to a chargeable interest in one of the dwellings,
and the company or a person connected with the company is entitled to
a chargeable interest in the other dwelling, or

(b) a chargeable interest in one of the dwellings is held for the purposes of
a collective investment scheme, and a chargeable interest in the other
40dwelling is held for the purposes of the same collective investment
scheme.

(It does not matter whether or not the interests are held for the same title.)

(3) If on a day in a chargeable period (“the day in question”) two parts of a
building constitute linked dwellings, this Part has effect in relation to the
45interests mentioned in paragraph (a) or (as the case may be) (b) of subsection
(2) as if the two parts were, on the day in question, suitable for use as a single
dwelling.

(4) Subsection (3) does not apply if the day in question is, in relation to a
chargeable interest mentioned in subsection (2)(a) or (as the case may be) (2)(b),
relievable by virtue of a provision mentioned in subsection (5).

(5) Those provisions are—

(a) 5section 131 (property rental businesses);

(b) section 132 (rental property: preparation for sale etc);

(c) section 135 (dwellings opened to the public);

(d) section 136 (property developers);

(e) section 137 (property developers: exchange of dwellings);

(f) 10section 139 (property traders);

(g) section 141 (financial institutions acquiring dwellings in the course of
lending);

(h) section 143 (occupation by certain employees or partners);

(i) section 146 (farmhouses);

(j) 15section 148 (charitable companies);

(k) section 150 (providers of social housing).

(6) The reference in subsection (2)(a) to a person connected with the company does
not include a public body (as defined in section 151) or a body listed in section
152(2) (bodies established for national purposes).

(7) 20If two dwellings in a building (dwelling A and dwelling B) are treated under
this section as suitable for use as a single dwelling, and dwelling B and a third
dwelling in the building (“dwelling C”) are treated under this section as
suitable for use as a single dwelling, all three are treated as suitable for use as
a single dwelling (and so on).

116 25Section 115: supplementary

(1) The reference in section 115(2)(b) to a chargeable interest being held for the
purposes of the same collective investment scheme includes a reference to a
person connected with the scheme being entitled to the interest.

(2) For the purposes of section 115, there is private access between two dwellings
30if the person entitled to possession of each dwelling is entitled, by reason of a
right of way or other interest in land, to have access to that person’s dwelling
from the other dwelling, without passing over any part of the building (or any
other land) in which a third party has an interest entitling that third party to
enter it.

(3) 35In subsection (2) “third party” means a person other than—

(a) the persons entitled to possession of the dwellings mentioned in
subsection (2), and

(b) persons connected with any of them.

(4) The use condition mentioned in section 115(1)(d) is that each of the two
40dwellings—

(a) is occupied (or usually occupied) by a relevant individual,

(b) is intended to be so occupied (or usually so occupied), or

(c) is not occupied.

(5) In subsection (4) “relevant individual” means—

(a) an individual connected with the company mentioned in section
115(2)(a),

(b) an individual connected with the collective investment scheme
mentioned in section 115(2)(b),

(c) 5an individual who occupies (or is to occupy) the dwelling concerned
otherwise than on commercial terms, or

(d) an individual who is employed wholly or partly in connection with the
occupation by a person falling within any of paragraphs (a) to (c) of a
dwelling in the building, or provides services in connection with such
10a person’s occupation of a dwelling in the building.

(6) In this section and section 115 references to the person entitled to possession of
a dwelling are to the person entitled to possession of the dwelling by reason of
an estate or interest held by that person.

117 Terraces etc

15Any structure (such as a terrace of houses or a pair of semi-detached houses)
that is composed of or includes dwellings is regarded as a building for the
purposes of sections 115 and 116.

Acquisitions and disposals

118 Acquisitions and disposals of chargeable interests

(1) 20References in this Part to the acquisition of a chargeable interest include any
acquisition however effected (including an acquisition effected by the act of
parties to a transaction, by order of a court or other authority, by or under any
statutory provision or by operation of law).

(2) The surrender or release of a chargeable interest is—

(a) 25an acquisition of that interest by any person whose interest or right is
benefited or enlarged by the transaction, and

(b) a disposal by the person ceasing to be entitled to that interest.

(3) The variation of a chargeable interest is—

(a) an acquisition of a chargeable interest by the person benefiting from the
30variation, and

(b) a disposal of a chargeable interest by the person whose interest is
subject to or limited by the variation.

119 Date of acquisition or disposal

(1) A person who acquires a chargeable interest in or over land that consists of or
35includes a dwelling is treated for the purposes of this Part as acquiring the
interest on the effective date of the acquisition (and therefore as entitled to the
interest with effect from that date: see section 169).

(2) A person who disposes of a chargeable interest in or over land that consists of
or includes a dwelling is treated for the purposes of this Part as ceasing to be
40entitled to the interest on the effective date of the disposal (and therefore as not
being entitled to the interest on that day: see section 169).

(3) If a person’s acquisition and disposal of a chargeable interest are completed on
the same day, then for the purposes of this Part—

(a) the person’s acquisition of the interest is ignored if it precedes the
disposal;

(b) the person’s disposal of the interest is ignored if it precedes the
acquisition.

(4) 5The effective date of an acquisition of a chargeable interest is—

(a) the date on which the acquisition is completed, or

(b) any alternative date the Commissioners for Her Majesty’s Revenue and
Customs may prescribe by regulations.

(5) The effective date of a disposal of a chargeable interest is—

(a) 10the date on which the disposal is completed, or

(b) any alternative date the Commissioners for Her Majesty’s Revenue and
Customs may specify by regulations.

120 Contract and conveyance: the purchaser

(1) This section applies where a person (“P”) enters into a contract under which—

(a) 15P is to acquire a relevant chargeable interest, and

(b) the acquisition is to be completed by a conveyance.

(2) P is not regarded as acquiring any chargeable interest by reason of entering
into the contract.

(3) If the contract is substantially performed without having been completed, this
20Part has effect as if the substantial performance of the contract were the
completion of the acquisition provided for by the contract.

(4) Accordingly, where subsection (3) applies and the contract is subsequently
completed by a conveyance, that completion is not treated for the purposes of
section 99 as effecting the acquisition of a chargeable interest.

(5) 25Where subsection (3) applies and—

(a) the contract is afterwards rescinded or annulled, or

(b) performance of the contract is for any other reason terminated before
the contract has been carried fully into effect,

this Part has effect as if P had at the relevant time disposed of the chargeable
30interest referred to in subsection (1)(a).

(6) In subsection (5) “the relevant time” means—

(a) the time when the rescission or annulment takes effect, or

(b) (as the case requires) the time when performance of the contract ceases.

(7) Where subsection (3) applies and the contract is afterwards varied (or partially
35rescinded) so that the chargeable interest to be acquired under the contract is
not the same as the chargeable interest to which the contract originally related,
this Part (including subsection (3)) has effect as if the variation of the contract
effected—

(a) the disposal by P of the chargeable interest referred to in subsection
40(1)(a), and

(b) the substantial performance of the contract, as varied.

(8) If the parties to the contract proceed as if they had varied the contract in the
way mentioned in subsection (7) (without actually doing so), subsection (7)
applies as if they had actually made the corresponding variation in the terms
45of the contract.