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

532

 

Agreement for lease

3          

In section 44 (contract and conveyance), after subsection (9) insert—

“(9A)   

Where—

(a)   

paragraph 12A of Schedule 17A applies (agreement for

lease), or

5

(b)   

paragraph 19(3) to (6) of Schedule 17A applies (missives of let

etc in Scotland),

   

it applies in place of subsections (4), (8) and (9).”.

Contract providing for conveyance to third party

4     (1)  

After section 44 insert—

10

“44A    

Contract providing for conveyance to third party

(1)   

This section applies where a contract is entered into under which a

chargeable interest is to be conveyed by one party to the contract (A)

at the direction or request of the other (B)—

(a)   

to a person (C) who is not a party to the contract, or

15

(b)   

either to such a person or to B.

(2)   

B is not regarded as entering into a land transaction by reason of

entering into the contract, but the following provisions have effect.

(3)   

If the contract is substantially performed B is treated for the purposes

of this Part as acquiring a chargeable interest, and accordingly as

20

entering into a land transaction.

   

The effective date of the transaction is when the contract is

substantially performed.

(4)   

Where the contract is (to any extent) afterwards rescinded or

annulled, or is for any other reason not carried into effect, the tax

25

paid by virtue of subsection (3) 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 contract.

(5)   

Subject to subsection (6), section 44 (contract and conveyance) does

30

not apply (except so far as it defines “substantial performance”) in

relation to the contract.

(6)   

Where—

(a)   

this section applies by virtue of subsection (1)(b), and

(b)   

by reason of B’s direction or request, A becomes obliged to

35

convey a chargeable interest to B,

   

section 44 applies to that obligation as it applies to a contract for a

land transaction that is to be completed by a conveyance.

(7)   

Section 44 applies in relation to any contract between B and C, in

respect of the chargeable interest referred to in subsection (1) above,

40

that is to be completed by a conveyance.

   

References to completion in that section, as it so applies, include

references to conveyance by A to C of the subject matter of the

contract between B and C.

 

 

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

533

 

(8)   

In this section “contract” includes any agreement and “conveyance”

includes any instrument.”.

      (2)  

In section 48 (chargeable interests), after subsection (6) insert—

“(7)   

This section has effect subject to subsection (3) of section 44A

(contract and conveyance to third party).”.

5

      (3)  

In section 77 (notifiable transactions), after subsection (4) insert—

“(5)   

A land transaction that a person is treated as entering into by virtue

of subsection (3) of section 44A (contract and conveyance to third

party) is notifiable.”.

Contract and conveyance: effect of transfer of rights

10

5     (1)  

Section 45 (contract and conveyance: effect of transfer of rights) is amended

as follows.

      (2)  

In subsection (1)—

(a)   

after paragraph (b) insert “, and

(c)   

paragraph 12B of Schedule 17A (assignment of

15

agreement for lease) does not apply.”;

(b)   

at the end insert “, and references to the transferor and the transferee

shall be read accordingly”.

      (3)  

For subsection (5) substitute—

“(5)   

Where a transfer of rights relates to part only of the subject-matter of

20

the original contract (“the relevant part”)—

(a)   

subsection (8)(b) of section 44 (restriction of charge to tax on

subsequent conveyance) has effect as if the reference to the

amount of tax chargeable on that contract were a reference to

an appropriate proportion of that amount, and

25

(b)   

a reference in the second sentence of subsection (3) above to

the original contract, or a reference in subsection (4) above to

the secondary contract arising from an earlier transfer of

rights, is to that contract so far as relating to the relevant part

(and that contract so far as not relating to the relevant part

30

shall be treated as a separate contract).”.

      (4)  

After that subsection insert—

“(5A)   

In relation to a land transaction treated as taking place by virtue of

subsection (3)— 

(a)   

references in Schedule 7 (group relief) to the vendor shall be

35

read as references to the vendor under the original contract;

(b)   

other references in this Part to the vendor shall be read,

where the context permits, as referring to either the vendor

under the original contract or the transferor.”.

      (5)  

After section 45 insert—

40

“45A    

Contract providing for conveyance to third party: effect of transfer of

rights

(1)   

This section applies where—

 

 

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

534

 

(a)   

a contract (“the original contract”) is entered into under

which a chargeable interest is to be conveyed by one party to

the contract (A) at the direction or request of the other (B)—

(i)   

to a person (C) who is not a party to the contract, or

(ii)   

either to such a person or to B,

5

   

and

(b)   

there is an assignment or other transaction (relating to the

whole or part of the subject-matter of the original contract) as

a result of which a person (D) becomes entitled to exercise

any of B’s rights under the original contract in place of B.

10

   

References in the following provisions of this section to a transfer of

rights are to any such assignment or other transaction.

(2)   

D is not regarded as entering into a land transaction by reason of the

transfer of rights, but section 44A (contract providing for conveyance

to third party) has effect in accordance with the following provisions

15

of this section.

(3)   

That section applies as if—

(a)   

D had entered into a contract (a “secondary contract”) in the

same terms as the original contract except with D as a party

instead of B, and

20

(b)   

the consideration due from D under the secondary contract

were—

(i)   

so much of the consideration under the original

contract as is referable to the subject-matter of the

transfer of rights and is to be given (directly or

25

indirectly) by D or a person connected with him, and

(ii)   

the consideration given for the transfer of rights.

(4)   

The substantial performance of the original contract shall be

disregarded if—

(a)   

it occurs at the same time as, and in connection with, the

30

substantial performance of the secondary contract, or

(b)   

it occurs after the transfer of rights.

(5)   

Where there are successive transfers of rights, subsection (3) has

effect in relation to each of them.

(6)   

The substantial performance of the secondary contract arising from

35

an earlier transfer of rights shall be disregarded if—

(a)   

it occurs at the same time as, and in connection with, the

substantial performance of the secondary contract arising

from a subsequent transfer of rights, or

(b)   

it occurs after that subsequent transfer.

40

(7)   

Where a transfer of rights relates to only part of the subject matter of

the original contract, or to only some of the rights under that

contract—

(a)   

a reference in subsection (3)(a) or (4) to the original contract,

or a reference in subsection (6) to the secondary contract

45

arising from an earlier transfer, is to that contract so far as

relating to that part or those rights, and

(b)   

that contract so far as not relating to that part or those rights

shall be treated as a separate contract.

 

 

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

535

 

(8)   

The effective date of a land transaction treated as entered into by

virtue of subsection (3) is not earlier than the date of the transfer of

rights.

(9)   

In relation to a such a transaction— 

(a)   

references in Schedule 7 (group relief) to the vendor shall be

5

read as references to A;

(b)   

other references in this Part to the vendor shall be read,

where the context permits, as referring to either A or B.

(10)   

Section 839 of the Taxes Act 1988 (connected persons) applies for the

purposes of subsection (3)(b).

10

(11)   

In this section “contract” includes any agreement.”.

      (6)  

In section 122 (index of defined expressions), in the entry for “vendor” insert

at the end “(see too sections 45(5A) and 45A(9))”.

Relief for sale and leaseback arrangements

6     (1)  

Section 57A (sale and leaseback arrangements) (inserted by the Stamp Duty

15

and Stamp Duty Land Tax (Variation of the Finance Act 2003) (No. 2)

Regulations 2003 (S.I. 2003/2816)) is amended as follows.

      (2)  

In subsection (3) (the qualifying conditions), for paragraph (b) substitute—

“(aa)   

that the sale transaction is entered into wholly or partly in

consideration of the leaseback transaction being entered into,

20

(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),”.

      (3)  

After paragraph (c) of that subsection insert—

“(d)   

that the sale is not a transfer of rights within the meaning of

25

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

(e)   

where A and B are both bodies corporate at the effective date

of the leaseback transaction, that they are not members of the

30

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

than market value).

Registration of land transactions

35

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

as taking place—

(a)   

under subsection (4) of section 44 (contract and conveyance)

40

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

conveyance to third party) or under that section as it applies

by virtue of section 45A (contract providing for conveyance

45

to third party: effect of transfer of rights).”.

 

 

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

536

 

“Effective date” of a transaction

8          

In section 119 (meaning of “effective date” of a transaction), in subsection (2)

(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

5

third party),

   

section 45A(8) (contract providing for conveyance to

third party: effect of transfer of rights),”;

(b)   

at the end insert—

   

“paragraph 12A(2) of Schedule 17A (agreement for lease

10

followed by substantial performance),

   

paragraph 12B(3) of that Schedule (assignment of

agreement for lease occurring after agreement

substantially performed), and

   

paragraph 19(3) of that Schedule (missives of let etc in

15

Scotland followed by substantial performance).”.

Chargeable consideration

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)

20

applies, so that there are two notifiable transactions (the first being

the contract and the second being the transaction effected on

completion), the condition in sub-paragraph (2)(a) is treated as

met in relation to the second transaction if it is met in relation to

the first.”.

25

      (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)

insert—

    “(4A)  

Sub-paragraphs (3) and (4) shall be disregarded for the purposes

30

of determining whether the land transaction in question is

notifiable.”.

Provisions relating to leases

10         

In Schedule 5 (amount of tax chargeable: rent), after paragraph 1 insert—

“Amounts payable in respect of periods before grant of lease

35

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.”

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)

40

Regulations 2003 (S.I. 2003/2816)) is amended as follows.

 

 

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

537

 

      (2)  

After paragraph 7 insert—

“First rent review in final quarter of fifth year

7A         

Where—

(a)   

a lease contains provision under which the rent may be

adjusted,

5

(b)   

under that provision the first (or only) such adjustment—

(i)   

is to an amount that (before the adjustment) is

uncertain, and

(ii)   

has effect from a date (the “review date”) that is

expressed as falling five years after a specified date,

10

   

and

(c)   

the specified date falls within the three months before the

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

15

term of the lease and ending with the review date.

           

References to the fifth year of the term of the lease shall be read

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

20

(c)   

a person claiming relief against re-entry or forfeiture as

under-lessee in relation to the original sub-lease (“the old

lease”) is granted a lease (“the new lease”) in pursuance of

an order of a court.”.

      (4)  

After paragraph 12 insert—

25

“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

(b)   

the agreement is substantially performed without having

30

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.

           

The effective date of the transaction is that date.

35

      (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

(b)   

the lease itself is treated for the purposes of paragraph 9

40

(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

reason not carried into effect, the tax paid by virtue of that sub-

45

paragraph shall (to that extent) be repaid by the Inland Revenue.

 

 

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

538

 

           

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”

have the same meanings as in section 44 (contract and

conveyance).

5

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

Wales or Northern Ireland a person assigns his interest as lessee

under an agreement for a lease.

10

      (2)  

If the assignment occurs without the agreement having been

substantially performed, section 44 (contract and conveyance) has

effect as if—

(a)   

the contract were with the assignee and not the assignor,

and

15

(b)   

the consideration given by the assignee for entering into

the contract included any consideration given by him for

the assignment.

      (3)  

If the assignment occurs after the agreement has been

substantially performed—

20

(a)   

the assignment is a separate land transaction, and

(b)   

the effective date of that transaction is the date of the

assignment.

      (4)  

Where there are successive assignments, this paragraph has effect

in relation to each of them.”.

25

      (5)  

In paragraph 16 (surrender of existing lease in return for new lease), at the

end insert—

           

“Paragraph 5 (exchanges) of Schedule 4 (chargeable

consideration) does not apply in such a case.”.

      (6)  

In paragraph 19 (provisions relating to leases in Scotland), for sub-

30

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”)—

(a)   

the first lease is treated as if it were surrendered at that

35

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

if it were granted in consideration of that surrender.

      (3)  

Where in Scotland—

40

(a)   

there are concluded missives of let that do not constitute a

lease, and

(b)   

the agreement represented by the missives of let is

substantially performed without a lease having been

executed,

45

           

the missives of let are treated as if they did constitute a lease (“the

notional lease”).

 

 

 
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