Finance Bill

House of Commons

Session 2002 - 03
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Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 37 — Stamp duty land tax and stamp duty
Part 2 — Re-enactment, with changes, of amendments made by section 109 regulations
560

      (2)
Sub-paragraph (1) does not apply to an increase of rent in
pursuance of a provision contained in the lease (but see paragraph
14).
Increase of rent treated as grant of new lease: abnormal increase after fifth year
14    (1)
This paragraph applies if, after the end of the fifth year of the term
5
of a lease—
(a)
the amount of rent payable increases (or is increased) in
accordance with the provisions of the lease, and
(b)
the rent payable as a result (“the new rent”) is such that the
increase falls to be regarded as abnormal (see paragraph
10
15).
      (2)
The increase in rent is treated as if it were the grant of a lease in
consideration of the excess rent.
      (3)
The excess rent is the difference between the new rent and the rent
previously taxed.
15
      (4)
The rent previously taxed is—
(a)
where the provisions of this paragraph have not
previously applied to a rent increase under the lease, the
rent that is assumed to be payable after the fifth year of the
term of the lease (in accordance with paragraph 7(3));
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(b)
where the provisions of this paragraph have previously so
applied, the rent payable as a result of the last increase in
relation to which the provisions of this paragraph applied.
      (5)
The deemed grant is treated as—
(a)
made on the date on which the increased rent first became
25
payable, and
(b)
for a term equal to the unexpired part of the original lease,

and as linked with the grant of the original lease (and with any
other transaction with which that transaction is linked).
      (6)
The assumption in paragraph 7(3) (that the rent does not change
30
after the end of the fifth year of the term of a lease) does not apply
for the purposes of this paragraph or paragraph 15 except for the
purpose of determining the rent previously taxed.
Increase of rent after fifth year: whether regarded as abnormal
15
Whether an increase in rent is to be regarded for the purposes of
35
paragraph 14 as abnormal is determined as follows:—

Step One

Find the start date, which is—
(a)
where the provisions of that paragraph have not
previously applied to a rent increase under the lease, the
40
beginning of the period by reference to which the rent
assumed to be payable after the fifth year of the term of the
lease is determined in accordance with paragraph 7(3);
(b)
where the provisions of that paragraph have previously so
applied, the date of the last increase in relation to which the
45
provisions of that paragraph applied.

Finance Bill
Schedule 37 — Stamp duty land tax and stamp duty
Part 2 — Re-enactment, with changes, of amendments made by section 109 regulations
561


Step Two

Divide the period between the start date and the date on which the
new rent first becomes payable (“the reference period”) into—
(a)
successive periods of twelve months running from the
start date (if any), and
5
(b)
any remaining period which does not fall within
paragraph (a).

Step Three

Find the factor by which the retail prices index has increased over
each period identified in step two.
10

This is a figure expressed as a decimal and determined by the
formula—

where—

RD is the retail prices index for the month in which the last
day of the period in question falls, and
15

RI is the retail prices index for the month in which the first
day of the period in question falls.

If, in relation to any period, RD is equal to or less than RI, the factor
by which the retail prices index has increased over the period in
question shall be treated as nil.
20

If, in relation to any period, the figure determined in accordance
with the formula would be a figure having more than 3 decimal
places, round it to the nearest third decimal place.

Step Four

Find the relevant factor for each period identified in step two.
25

This is a figure expressed as a decimal and determined by the
formula—

where—

m is the number of months in the period in question (treating
part of a month as a whole month), and
30

r is the factor by which the retail prices index has increased
over the period in question, determined under step three.

If, in relation to any period, the figure determined in accordance
with the formula would have more than 3 decimal places, round it
to the nearest third decimal place.
35

Finance Bill
Schedule 37 — Stamp duty land tax and stamp duty
Part 2 — Re-enactment, with changes, of amendments made by section 109 regulations
562


Step Five

Find the uplift factor for the reference period as follows.

If there is only one period identified in step two, the uplift factor
for the reference period is the relevant factor for that period.

If there are only two periods identified in step two, the uplift factor
5
for the reference period is calculated by multiplying the relevant
factors for those periods.

If there are more than two periods identified in step two, the uplift
factor for the reference period is calculated by—
(a)
multiplying the relevant factors for the first two periods,
10
(b)
multiplying the result by the relevant factor for the next
period,
(c)
if there are further periods, multiplying the result by the
relevant factor for the next period,

until all periods have been taken into account.
15

If the uplift factor for the reference period would be a figure
having more than 3 decimal places, round it to the nearest third
decimal place.

Step Six

The rent increase is regarded as abnormal if the new rent is greater
20
than:

where—

R is the rent previously taxed (see paragraph 14(4)), and

UF is the uplift factor for the reference period.
Surrender of existing lease in return for new lease
25
16
Where a lease is granted in consideration of the surrender of an
existing lease between the same parties—
(a)
the grant of the new lease does not count as chargeable
consideration for the surrender, and
(b)
the surrender does not count as chargeable consideration
30
for the grant of the new lease.

Paragraph 5 (exchanges) of Schedule 4 (chargeable consideration)
does not apply in such a case.
Assignment of lease: assumption of obligations by assignee
17
In the case of an assignment of a lease the assumption by the
35
assignee of the obligation—
(a)
to pay rent, or
(b)
to perform or observe any other undertaking of the tenant
under the lease,

does not count as chargeable consideration for the assignment.
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
563

Reverse premium
18    (1)
In the case of the grant, assignment or surrender of a lease a
reverse premium does not count as chargeable consideration.
      (2)
A “reverse premium” means—
(a)
in relation to the grant of a lease, a premium moving from
5
the landlord to the tenant;
(b)
in relation to the assignment of a lease, a premium moving
from the assignor to the assignee;
(c)
in relation to the surrender of a lease, a premium moving
from the tenant to the landlord.
10
Provisions relating to leases in Scotland
19    (1)
In the application of this Part to Scotland—
(a)
any reference to the term of a lease is to the period of the
lease, and
(b)
any reference to the reversion on a lease is to the interest of
15
the landlord in the property subject to the lease.
      (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
20
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—
25
(a)
there is an agreement (including missives of let not
constituting a lease) under which a lease is to be executed,
and
(b)
the agreement is substantially performed without a lease
having been executed,
30

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 when the agreement is
substantially performed.
35
      (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
(b)
the lease itself is treated for the purposes of paragraph 9 as
40
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 is in conformity with, or
relates to substantially the same property and period as, the
missives of let or other agreement.
45
      (6)
Where sub-paragraph (3) applies and the agreement is (to any
extent) afterwards rescinded or annulled, or is for any other

Finance Bill
Schedule 37 — Stamp duty land tax and stamp duty
Part 2 — Re-enactment, with changes, of amendments made by section 109 regulations
564

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.”.
      (3)
In section 51 (contingent, uncertain or unascertained consideration), after
5
subsection (4) add—
“(5)
This section applies in relation to chargeable consideration
consisting of rent only to the extent that it is applied by paragraph 7
of Schedule 17A.”.
      (4)
In section 80 (adjustment where contingency ceases or consideration
10
becomes certain)—
(a)
in subsection (3) for “land transaction return” substitute “return
under section 76 (general requirement to make land transaction
return), subject to the adaptation that references to the effective date
of the transaction shall be read as references to the date of the event
15
as a result of which the return is required”; and
(b)
after subsection (4) add—
“(5)
This section does not apply so far as the consideration
consists of rent (see paragraph 8 of Schedule 17A).”.
      (5)
In section 87 (interest on unpaid tax), in subsection (3) (meaning of “the
20
relevant date”), after paragraph (aa) (inserted by paragraph 19(3) above)
insert—
“(ab)
in the case of an amount payable under paragraph 3(3) or 4(3)
of Schedule 17A (leases that continue after a fixed term and
treatment of leases for an indefinite term), the day on which
25
the lease becomes treated as being for a longer fixed term;”.
      (6)
In section 90 (application to defer payment in case of contingent or uncertain
consideration), after subsection (6) add—
“(7)
This section does not apply so far as the consideration consists of
rent.”.
30
      (7)
In the table in section 122 (index of defined expressions), in the second
column of the entry for “lease and related expressions” for “section 120”
substitute “Schedule 17A”.
      (8)
In paragraph 7 of Schedule 19 (commencement and transitional provisions:
earlier related transactions under stamp duty), after sub-paragraph (3)
35
add—
     “(4)
For the purposes of paragraph 5 of Schedule 17A (treatment of
successive linked leases) no account shall be taken of any
transaction that is not an SDLT transaction.”.
Abolition of stamp duty: application to duplicates and counterparts
40
23
In section 125(5) (abolition of stamp duty except on instruments relating to
stock or marketable securities: instruments to which the section applies)—
(a)
in paragraph (a), after “instrument effecting a land transaction”,
(b)
in paragraph (b), after “instrument effecting a transaction other than
a land transaction”, and
45
(c)
in the second sentence, after “instrument effecting both a land
transaction and a transaction other than a land transaction”,

Finance Bill
Schedule 37 — Stamp duty land tax and stamp duty
Part 2 — Re-enactment, with changes, of amendments made by section 109 regulations
565


insert “(or any duplicate or counterpart of such an instrument)”.
Application of transitional provisions to certain contracts
24
In Schedule 19 (commencement and transitional provisions), after
paragraph 4 (contracts entered into before the implementation date) insert—
“Contracts substantially performed after implementation date
5
4A
Where—
(a)
a transaction is effected in pursuance of a contract entered
into before the first relevant date,
(b)
the contract is substantially performed, without having
been completed, after the implementation date, and
10
(c)
there is subsequently an event within paragraph 3(3) by
virtue of which the transaction is an SDLT transaction,

the effective date of the transaction shall be taken to be the date of
the event referred to in paragraph (c) (and not the date of
substantial performance).
15
Application of provisions in case of transfer of rights
4B    (1)
This paragraph applies where section 44 (contract and
conveyance) has effect in accordance with section 45 (effect of
transfer of rights).
      (2)
Any reference in paragraph 3, 4 or 4A to the date when a contract
20
was entered into (or made) shall be read, in relation to a contract
deemed to exist by virtue of section 45(3) (deemed secondary
contract with transferee), as a reference to the date of the
assignment, subsale or other transaction in question.”.
Stamping of contract or agreement where transaction on completion or grant of lease subject to
25
stamp duty land tax
25    (1)
In Schedule 19 (commencement and transitional provisions), after
paragraph 7 (earlier related transactions under stamp duty) insert—
“Stamping of contract where transaction on completion subject to stamp duty land
tax
30
7A    (1)
This paragraph applies where—
(a)
a contract that apart from paragraph 7 of Schedule 13 to the
Finance Act 1999 (contracts chargeable as conveyances on
sale) would not be chargeable with stamp duty is entered
into before the implementation date,
35
(b)
a conveyance made in conformity with the contract is
effected on or after the implementation date, and
(c)
the transaction effected on completion is an SDLT
transaction or would be but for an exemption or relief from
stamp duty land tax.
40
      (2)
If in those circumstances the contract is presented for stamping
together with a Revenue certificate as to compliance with the

Finance Bill
Schedule 38 — Stamp duty land tax: claims not included in returns
566

provisions of this Part of this Act in relation to the transaction
effected on completion—
(a)
the payment of stamp duty land tax on that transaction or,
as the case may be, the fact that no such tax was payable
shall be denoted on the contract by a particular stamp, and
5
(b)
the contract shall be deemed thereupon to be duly
stamped.
      (3)
In this paragraph “conveyance” includes any instrument.”.
      (2)
In paragraph 8 of Schedule 19 (time for stamping agreement for lease: lease
subject to stamp duty land tax)—
10
(a)
for the heading substitute “Stamping of agreement for lease where
grant of lease subject to stamp duty land tax”, and
(b)
in sub-paragraph (1) for the opening words substitute “This
paragraph applies where—”.
      (3)
For sub-paragraph (2) of that paragraph substitute—
15
     “(2)
If in those circumstances the agreement is presented for stamping
together with a Revenue certificate as to compliance with the
provisions of this Part of this Act in relation to the grant of the
lease—
(a)
the payment of stamp duty land tax in respect of the grant
20
of the lease or, as the case may be, the fact that no such tax
was payable shall be denoted on the agreement by a
particular stamp, and
(b)
the agreement shall be deemed thereupon to be duly
stamped.”.
25
      (4)
In section 122 (index of defined expressions), at the appropriate place
insert—

“Revenue certificate
section 79(3)(a)”.

Commencement
26
This Part of this Schedule applies in relation to any transaction of which the
30
effective date (within the meaning of Part 4 of the Finance Act 2003) is on or
after the day on which this Act is passed.
Schedule 38
Section 292

Stamp duty land tax: claims not included in returns

The following is the Schedule inserted after Schedule 11 to the Finance Act
35