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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—equation: over[id[plus[times[char[R],char[D]],minus[times[char[R],char[I]]]]],times[char[R],

char[I]]]

           

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—equation: plus[num[1.00000000,"1"],id[(*i2i*)cross[num[0.05000000,"0.05"],over[char[m],num[

12.00000000,"12"]]]],char[r]]

           

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:equation: cross[char[R],times[char[U],char[F]]]

           

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

 

 

 
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