Finance Bill

House of Commons

Session 2003 - 04
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Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 37 — Stamp duty land tax and stamp duty
Part 1 — Amendments to Part 4 of the Finance Act 2003: general
509

      (3)
After paragraph (c) of that subsection insert—
“(d)
that the sale is not a transfer of rights within the meaning of
section 45 (contract and conveyance: effect of transfer of
rights) or 45A (contract providing for conveyance to third
party: effect of transfer of rights), and
5
(e)
where A and B are both bodies corporate at the effective date
of the leaseback transaction, that they are not members of the
same group for the purposes of group relief (see paragraph 1
of Schedule 7) at that date.”.
      (4)
Omit subsection (4) (chargeable consideration for sale taken to be not less
10
than market value).
Registration of land transactions
7
In section 79 (registration of land transactions etc), in subsection (2)
(transactions to which section does not apply), for the words from “other
than” to the end of paragraph (b) substitute “other than a transaction treated
15
as taking place—
(a)
under subsection (4) of section 44 (contract and conveyance)
or under that section as it applies by virtue of section 45
(contract and conveyance: effect of transfer of rights), or
(b)
under subsection (3) of section 44A (contract providing for
20
conveyance to third party) or under that section as it applies
by virtue of section 45A (contract providing for conveyance
to third party: effect of transfer of rights).”.
“Effective date” of a transaction
8
In section 119 (meaning of “effective date” of a transaction), in subsection (2)
25
(cases where effective date is not date of completion)—
(a)
after the entry for section 44(4) insert—

“section 44A(3) (contract providing for conveyance to
third party),

section 45A(8) (contract providing for conveyance to
30
third party: effect of transfer of rights),”;
(b)
at the end insert—

“paragraph 12A(2) of Schedule 17A (agreement for lease
followed by substantial performance),

paragraph 12B(3) of that Schedule (assignment of
35
agreement for lease occurring after agreement
substantially performed), and

paragraph 19(3) of that Schedule (missives of let etc in
Scotland followed by substantial performance).”.
Chargeable consideration
40
9     (1)
Schedule 4 (chargeable consideration) is amended as follows.
      (2)
In paragraph 10 (carrying out of works), after sub-paragraph (2) insert—
    “(2A)
Where subsection (8) of section 44 (contract and conveyance)
applies, so that there are two notifiable transactions (the first being
the contract and the second being the transaction effected on
45
completion), the condition in sub-paragraph (2)(a) is treated as

Finance Bill
Schedule 37 — Stamp duty land tax and stamp duty
Part 1 — Amendments to Part 4 of the Finance Act 2003: general
510

met in relation to the second transaction if it is met in relation to
the first.”.
      (3)
In paragraph 17 (arrangements involving public or educational bodies)
(inserted by the Stamp Duty Land Tax (Amendment of Schedule 4 to the
Finance Act 2003) Regulations 2003 (S.I. 2003/3293)), after sub-paragraph (4)
5
insert—
    “(4A)
Sub-paragraphs (3) and (4) shall be disregarded for the purposes
of determining whether the land transaction in question is
notifiable.”.
Provisions relating to leases
10
10
In Schedule 5 (amount of tax chargeable: rent), after paragraph 1 insert—
“Amounts payable in respect of periods before grant of lease
1A
For the purposes of this Part “rent” does not include any
chargeable consideration for the grant of a lease that is payable in
respect of a period before the grant of the lease.”
15
11    (1)
Schedule 17A (further provisions relating to leases) (inserted by the Stamp
Duty and Stamp Duty Land Tax (Variation of the Finance Act 2003) (No. 2)
Regulations 2003 (S.I. 2003/2816)) is amended as follows.
      (2)
After paragraph 7 insert—
“First rent review in final quarter of fifth year
20
7A
Where—
(a)
a lease contains provision under which the rent may be
adjusted,
(b)
under that provision the first (or only) such adjustment—
(i)
is to an amount that (before the adjustment) is
25
uncertain, and
(ii)
has effect from a date (the “review date”) that is
expressed as falling five years after a specified date,

and
(c)
the specified date falls within the three months before the
30
beginning of the term of the lease,

this Schedule has effect as if references to the first five years of the
term of the lease were to the period beginning with the start of the
term of the lease and ending with the review date.

References to the fifth year of the term of the lease shall be read
35
accordingly.”.
      (3)
In paragraph 9 (rent for overlap period in case of grant of further lease), in
sub-paragraph (1), at the end of paragraph (b) insert “, or
(c)
a person claiming relief against re-entry or forfeiture as
under-lessee in relation to the original sub-lease (“the old
40
lease”) is granted a lease (“the new lease”) in pursuance of
an order of a court.”.

Finance Bill
Schedule 37 — Stamp duty land tax and stamp duty
Part 1 — Amendments to Part 4 of the Finance Act 2003: general
511

      (4)
After paragraph 12 insert—
“Agreement for lease
12A   (1)
This paragraph applies where in England and Wales or Northern
Ireland—
(a)
an agreement for a lease is entered into, and
5
(b)
the agreement is substantially performed without having
been completed.
      (2)
The agreement is treated as if it were the grant of a lease in
accordance with the agreement (“the notional lease”), beginning
with the date of substantial performance.
10

The effective date of the transaction is that date.
      (3)
Where a lease is subsequently granted in pursuance of the
agreement—
(a)
the notional lease is treated as if it were surrendered at that
time, and
15
(b)
the lease itself is treated for the purposes of paragraph 9
(rent for overlap period in case of grant of further lease) as
if it were granted in consideration of that surrender.
      (4)
Where sub-paragraph (1) applies and the agreement is (to any
extent) afterwards rescinded or annulled, or is for any other
20
reason not carried into effect, the tax paid by virtue of that sub-
paragraph shall (to that extent) be repaid by the Inland Revenue.

Repayment must be claimed by amendment of the land
transaction return made in respect of the agreement.
      (5)
In this paragraph “substantially performed” and “completed”
25
have the same meanings as in section 44 (contract and
conveyance).
Assignment of agreement for lease
12B   (1)
This paragraph applies, in place of section 45 (contract and
conveyance: effect of transfer of rights) where in England and
30
Wales or Northern Ireland a person assigns his interest as lessee
under an agreement for a lease.
      (2)
If the assignment occurs without the agreement having been
substantially performed, section 44 (contract and conveyance) has
effect as if—
35
(a)
the contract were with the assignee and not the assignor,
and
(b)
the consideration given by the assignee for entering into
the contract included any consideration given by him for
the assignment.
40
      (3)
If the assignment occurs after the agreement has been
substantially performed—
(a)
the assignment is a separate land transaction, and
(b)
the effective date of that transaction is the date of the
assignment.
45

Finance Bill
Schedule 37 — Stamp duty land tax and stamp duty
Part 1 — Amendments to Part 4 of the Finance Act 2003: general
512

      (4)
Where there are successive assignments, this paragraph has effect
in relation to each of them.”.
      (5)
In paragraph 16 (surrender of existing lease in return for new lease), at the
end insert—

“Paragraph 5 (exchanges) of Schedule 4 (chargeable
5
consideration) does not apply in such a case.”.
      (6)
In paragraph 19 (provisions relating to leases in Scotland), 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
10
executed (“the second lease”)—
(a)
the first lease is treated as if it were surrendered at that
time, and
(b)
the second lease is treated for the purposes of paragraph 9
(rent for overlap period in case of grant of further lease) as
15
if it were granted in consideration of that surrender.
      (3)
Where in Scotland—
(a)
there are concluded missives of let that do not constitute a
lease, and
(b)
the agreement represented by the missives of let is
20
substantially performed without a lease having been
executed,

the missives of let are treated as if they did constitute a lease (“the
notional lease”).

The effective date of the transaction is when the agreement is
25
substantially performed.
      (4)
Where sub-paragraph (3) applies and at some later time a lease is
executed—
(a)
the notional lease is treated as if it were surrendered at that
time, and
30
(b)
the lease itself is treated for the purposes of paragraph 9 as
if it were granted in consideration of that surrender.
      (5)
References in sub-paragraphs (2) to (4) to the execution of a lease
are to the execution of a lease that either—
(a)
is in conformity with the missives of let, or
35
(b)
relates to substantially the same property and period as the
missives of let.
      (6)
Where sub-paragraph (3) applies and the agreement is (to any
extent) afterwards rescinded or annulled, or is for any other
reason not carried into effect, the tax paid by virtue of that sub-
40
paragraph shall (to that extent) be repaid by the Inland Revenue.

Repayment must be claimed by amendment of the land
transaction return made in respect of the agreement.”.
Transfer of rights after 10th July 2003 relating to earlier contract: applicability of SDLT regime
12
In Schedule 19 (commencement and transitional provisions), in paragraph 3
45
(contract entered into before first relevant date), for paragraph (c) of sub-

Finance Bill
Schedule 37 — Stamp duty land tax and stamp duty
Part 2 — Re-enactment, with changes, of amendments made by section 109 regulations
513

paragraph (3) substitute—
“(c)
if on or after that date there is an assignment, subsale or
other transaction (relating to the whole or part of the
subject-matter of the contract) as a result of which a person
other than the purchaser under the contract becomes
5
entitled to call for a conveyance to him.”.
Commencement
13    (1)
Paragraph 4, and paragraphs 7 and 8 so far as relating to the section 44A
inserted by that paragraph, apply in relation to any contract entered into
after 17th March 2004.
10
      (2)
Paragraph 5, and paragraphs 7 and 8 so far as relating to the section 45A
inserted by that paragraph, apply in relation to any transfer of rights
occurring after that date.
      (3)
Subject to sub-paragraphs (4) and (5), the amendments made by the other
provisions of this Part of this Schedule apply in relation to any transaction
15
of which the effective date is after 17th March 2004.
      (4)
Paragraph 12 does not apply in relation to a contract that was substantially
performed before 17th March 2004.
      (5)
Paragraphs 6 and 11 (which contain amendments the effect of which is
reproduced in Part 2 of this Schedule) do not apply in relation to any
20
transaction of which the effective date is on or after the day on which this Act
is passed.
      (6)
In this paragraph—
“effective date” and “substantially performed” have the same
meaning as in Part 4 of the Finance Act 2003 (as amended by this
25
Part of this Schedule);
“transfer of rights” has the same meaning as in section 45 of that Act
or, as the case may require, section 45A of that Act (inserted by
paragraph 5(5)).
Part 2
30
Re-enactment, with changes, of amendments made by section 109 regulations
Introduction and revocation
14    (1)
This Part of this Schedule contains amendments to Parts 4 and 5 of the
Finance Act 2003 (stamp duty land tax and stamp duty) corresponding,
subject to certain changes, to those made by the Stamp Duty and Stamp Duty
35
Land Tax (Variation of the Finance Act 2003) (No. 2) Regulations 2003
(S.I. 2003/2816) (made under section 109 of that Act).
      (2)
Those regulations are revoked.
Meaning of taking possession
15    (1)
Section 44 (contract and conveyance) is amended as follows.
40
      (2)
In subsection (5)(a) (meaning of “substantial performance”: purchaser
taking possession), after “the purchaser” insert “, or a person connected with
the purchaser,”.

Finance Bill
Schedule 37 — Stamp duty land tax and stamp duty
Part 2 — Re-enactment, with changes, of amendments made by section 109 regulations
514

      (3)
In subsection (6) (meaning of taking possession)—
(a)
for paragraph (a) substitute—
“(a)
possession includes receipt of rents and profits or the
right to receive them, and”; and
(b)
in paragraph (b), for “the purchaser takes possession” substitute
5
“possession is taken”.
      (4)
After subsection (10) add—
“(11)
Section 839 of the Taxes Act 1988 (connected persons) has effect for
the purposes of this section.”.
Relief for sale and leaseback arrangements
10
16
After section 57 (disadvantaged areas relief) insert—
“57A
Sale and leaseback arrangements
(1)
The leaseback element of a sale and leaseback arrangement is exempt
from charge if the qualifying conditions specified below are met.
(2)
A “sale and leaseback” arrangement means an arrangement under
15
which—
(a)
A transfers or grants to B a major interest in land (the “sale”),
and
(b)
out of that interest B grants a lease to A (the “leaseback”).
(3)
The qualifying conditions are—
20
(a)
that the sale transaction is entered into wholly or partly in
consideration of the leaseback transaction being entered into,
(b)
that the only other consideration (if any) for the sale is the
payment of money or the assumption, satisfaction or release
of a debt (or both),
25
(c)
that the sale is not a transfer of rights within the meaning of
section 45 (contract and conveyance: effect of transfer of
rights) or 45A (contract providing for conveyance to third
party: effect of transfer of rights), and
(d)
where A and B are both bodies corporate at the effective date
30
of the leaseback transaction, that they are not members of the
same group for the purposes of group relief (see paragraph 1
of Schedule 7) at that date.
(4)
In this section—

“debt” means an obligation, whether certain or contingent, to
35
pay a sum of money either immediately or at a future date;
and

“money” means money in sterling or another currency.”.
Relief for certain acquisitions of residential property
17    (1)
For sections 58 and 59 (relief for certain exchanges of residential property
40

Finance Bill
Schedule 37 — Stamp duty land tax and stamp duty
Part 2 — Re-enactment, with changes, of amendments made by section 109 regulations
515

and relocation relief) substitute—
“58A
Relief for certain acquisitions of residential property
Schedule 6A provides for relief in the case of certain acquisitions of
residential property.”.
      (2)
After Schedule 6 insert—
5
“Schedule 6A
Section 58A

Relief for certain acquisitions of residential property
Acquisition by house-building company from individual acquiring new dwelling
1     (1)
Where a dwelling (“the old dwelling”) is acquired by a house-
building company from an individual (whether alone or with
10
other individuals), the acquisition is exempt from charge if the
following conditions are met.
      (2)
The conditions are—
(a)
that the individual (whether alone or with other
individuals) acquires from the house-building company a
15
new dwelling,
(b)
that the individual—
(i)
occupied the old dwelling as his only or main
residence at some time in the period of two years
ending with the date of its acquisition, and
20
(ii)
intends to occupy the new dwelling as his only or
main residence,
(c)
that each acquisition is entered into in consideration of the
other, and
(d)
that the area of land acquired by the house-building
25
company does not exceed the permitted area.
      (3)
Where the conditions in sub-paragraph (2)(a) to (c) are met but the
area of land acquired by the house-building company exceeds the
permitted area, the chargeable consideration for the acquisition is
taken to be the amount calculated by deducting the market value
30
of the permitted area from the market value of the old dwelling.
      (4)
A “house-building company” means a company that carries on the
business of constructing or adapting buildings or parts of
buildings for use as dwellings.

References in this paragraph to such a company include any
35
company connected with it.
      (5)
In this paragraph—
(a)
references to the acquisition of the new dwelling are to the
acquisition, by way of grant or transfer, of a major interest
in the dwelling;
40
(b)
references to the acquisition of the old dwelling are to the
acquisition, by way of transfer, of a major interest in the
dwelling; and
(c)
references to the market value of the old dwelling and of
the permitted area are, respectively, to the market value of
45