Finance Bill

House of Commons

Session 2004 - 05
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Finance Bill

Finance Bill
Schedule 16 — Stamp duty land tax: alternative property finance
279

   “(10)
This section applies only in relation to land in Scotland.”
      (6)
In the heading, after “finance” insert “in Scotland”.
4
After section 72 insert—
“72A
Alternative property finance in Scotland: land sold to financial
institution and individual in common
5
(1)
This section applies where arrangements are entered into between an
individual and a financial institution under which—
(a)
the institution and the individual purchase a major interest in
land as owners in common (“the first transaction”),
(b)
the institution and the individual enter into an agreement
10
under which the individual has a right to occupy the land
exclusively (“the second transaction”), and
(c)
the institution and the individual enter into an agreement
under which the individual has a right to require the
institution to transfer to the individual (in one transaction or
15
a series of transactions) the whole interest purchased under
the first transaction.
(2)
The first transaction is exempt from charge if the vendor is—
(a)
the individual, or
(b)
another financial institution by whom the interest was
20
acquired under arrangements of the kind mentioned in
subsection (1) entered into between it and the individual.
(3)
The second transaction is exempt from charge if the provisions of this
Part relating to the first transaction are complied with (including the
payment of any tax chargeable).
25
(4)
Any transfer to the individual that results from the exercise of the
right mentioned in subsection (1)(c) (“a further transaction”) is
exempt from charge if—
(a)
the provisions of this Part relating to the first transaction are
complied with, and
30
(b)
at all times between the first and the further transaction—
(i)
the interest purchased under the first transaction is
held by a financial institution and the individual as
owners in common, and
(ii)
the land is occupied by the individual under the
35
agreement mentioned in subsection (1)(b).
(5)
The agreement mentioned in subsection (1)(c) is not to be treated—
(a)
as substantially performed unless and until the whole
interest purchased by the institution under the first
transaction has been transferred (and accordingly section
40
44(5) does not apply), or
(b)
as a distinct land transaction by virtue of section 46 (options
and rights of pre-emption).
(6)
The requirements of subsection (1), or (4)(b)(ii), are not met if the
individual enters into the arrangements, or occupies the land, as
45
partner and any of the other partners is not an individual.

Finance Bill
Schedule 17 — Stamp duty land tax: miscellaneous amendments
Part 1 — Amendments coming into force in accordance with paragraph 16
280

(7)
A further transaction that is exempt from charge by virtue of
subsection (4) is not a notifiable transaction unless the transaction
involves the transfer to the individual of the whole interest
purchased by the institution under the first transaction, so far as not
transferred by a previous further transaction.
5
(8)
In this section “financial institution” has the same meaning as in
section 71A.
(9)
References in this section to an individual shall be read, in relation to
times after the death of the individual concerned, as references to his
personal representatives.
10
(10)
This section applies only in relation to land in Scotland.”
Consequential amendments
5     (1)
Section 73 (alternative property finance: land sold to individual and re-sold
to individual) is amended as follows.
      (2)
In subsection (2)(b), for “section 72(1)” substitute “section 71A(1), 72(1) or
15
72A(1)”.
      (3)
In subsection (5)(a), for “section 72” substitute “section 71A”.
6
In section 122 (index of defined expressions), in the entry for “notifiable (in
relation to a land transaction)” at the end insert “(see too sections 71A(7) and
72A(7))”.
20
Commencement
7     (1)
Paragraphs 2 and 3, and paragraphs 5 and 6 so far as relating to section 71A
of FA 2003, have effect in any case where the effective date of the first
transaction, within the meaning of section 71A of FA 2003 (as inserted by
paragraph 2), falls on or after the day on which this Act is passed.
25
      (2)
Paragraph 4, and paragraphs 5 and 6 so far as relating to section 72A of FA
2003, have effect in any case where the effective date of the first transaction,
within the meaning of section 72A of FA 2003 (as inserted by paragraph 4),
falls on or after the day on which this Act is passed.
      (3)
In this paragraph “the effective date” has the same meaning as in Part 4 of
30
FA 2003.
Schedule 17
Section 142

Stamp duty land tax: miscellaneous amendments
Part 1
Amendments coming into force in accordance with paragraph 16
35
Introduction
1
Part 4 of FA 2003 (stamp duty land tax) is amended in accordance with this
Part of this Schedule.

Finance Bill
Schedule 17 — Stamp duty land tax: miscellaneous amendments
Part 1 — Amendments coming into force in accordance with paragraph 16
281

Transfer of rights: exclusion of transaction to which alternative finance provisions apply
2
In section 45 (contract and conveyance: effect of transfer of rights) at the end
of subsection (3) insert “except in a case where the secondary contract gives
rise to a transaction that is exempt from charge by virtue of subsection (3) of
section 73 (alternative property finance: land sold to financial institution and
5
re-sold to individual)”.
Sale and leaseback arrangements
3
In section 57A (sale and leaseback arrangements) after subsection (3)
insert—
“(3A)
Where the leaseback element of a sale and leaseback arrangement is
10
exempt from charge by virtue of this section, the market value of the
subject-matter of each transaction is to be determined for the
purposes of this Part without reference to any incumbrance which is
attached to the subject-matter by virtue of the arrangement.”
Group relief
15
4
In paragraph 1 of Schedule 7 (group relief), in sub-paragraph (7) for
“paragraph 3” substitute “paragraphs 3 and 4A”.
5
In paragraph 3 of Schedule 7 (withdrawal of group relief), at the end of sub-
paragraph (5) insert “and paragraph 4A (withdrawal of group relief in
certain cases involving successive transactions)”.
20
6
In paragraph 4 of Schedule 7 (cases in which group relief is not
withdrawn)—
(a)
in sub-paragraph (3), for paragraph (b) substitute—
“(b)
another company that—
(i)
is above the vendor in the group structure,
25
and
(ii)
as a result of the transaction ceases to be a
member of the same group as the
purchaser.”, and
(b)
in sub-paragraph (5), for “this purpose” substitute “the purposes of
30
sub-paragraphs (3) and (4)”.
7
After paragraph 4 of Schedule 7 insert—
“Withdrawal of group relief in certain cases involving successive transactions
4A    (1)
Where, in the case of a transaction (“the relevant transaction”) that
is exempt from charge by virtue of paragraph 1 (group relief)—
35
(a)
there is a change in the control of the purchaser,
(b)
that change occurs—
(i)
before the end of the period of three years
beginning with the effective date of the relevant
transaction, or
40
(ii)
in pursuance of, or in connection with,
arrangements made before the end of that period,

Finance Bill
Schedule 17 — Stamp duty land tax: miscellaneous amendments
Part 1 — Amendments coming into force in accordance with paragraph 16
282

(c)
apart from this paragraph, group relief in relation to the
relevant transaction would not be withdrawn under
paragraph 3, and
(d)
any previous transaction falls within sub-paragraph (2),

paragraphs 3 and 4 have effect in relation to the relevant
5
transaction as if the vendor in relation to the earliest previous
transaction falling within sub-paragraph (2) were the vendor in
relation to the relevant transaction.
      (2)
A previous transaction falls within this sub-paragraph if—
(a)
the previous transaction is exempt from charge by virtue of
10
paragraph 1, 7 or 8,
(b)
the effective date of the previous transaction is less than
three years before the date of the event falling within sub-
paragraph (1)(a),
(c)
the chargeable interest acquired under the relevant
15
transaction by the purchaser in relation to that transaction
is the same as, comprises, forms part of, or is derived from,
the chargeable interest acquired under the previous
transaction by the purchaser in relation to the previous
transaction, and
20
(d)
since the previous transaction, the chargeable interest
acquired under that transaction has not been acquired by
any person under a transaction that is not exempt from
charge by virtue of paragraph 1, 7 or 8.
      (3)
For the purposes of sub-paragraph (1)(a) there is a change in the
25
control of a company if—
(a)
any person who controls the company (alone or with
others) ceases to do so,
(b)
a person obtains control of the company (alone or with
others), or
30
(c)
the company is wound up.

References to “control” in this sub-paragraph shall be construed in
accordance with section 416 of the Taxes Act 1988.
      (4)
If two or more transactions effected at the same time are the
earliest previous transactions falling within sub-paragraph (2), the
35
reference in sub-paragraph (1) to the vendor in relation to the
earliest previous transaction is a reference to the persons who are
the vendors in relation to the earliest previous transactions.
      (5)
In this paragraph “arrangements” includes any scheme,
agreement or understanding, whether or not legally enforceable.”
40
8
In Schedule 17A (further provisions relating to leases) in paragraph 11(5)(a)
for the words from “the purchaser” to the end substitute “the event falling
within paragraph 3(1)(a) of Schedule 7 (purchaser ceasing to be a member of
the same group as the vendor), as read with paragraph 4A of that Schedule”.
Acquisition relief
45
9
In paragraph 8 of Schedule 7 (acquisition relief)—
(a)
in sub-paragraph (1)(b) for “the first and second conditions”
substitute “all the conditions”, and

Finance Bill
Schedule 17 — Stamp duty land tax: miscellaneous amendments
Part 1 — Amendments coming into force in accordance with paragraph 16
283

(b)
after sub-paragraph (5) insert—
   “(5A)
The third condition is that the undertaking or part
acquired by the acquiring company has as its main activity
the carrying on of a trade that does not consist wholly or
mainly of dealing in chargeable interests.
5

In this sub-paragraph “trade” has the same meaning as in
the Taxes Act 1988.”
Withdrawal of money etc from partnership after transfer of chargeable interest
10
In Schedule 15 (partnerships) after paragraph 17 insert—
“Withdrawal of money etc from partnership after transfer of chargeable interest
10
17A   (1)
This paragraph applies where—
(a)
there is a transfer of a chargeable interest to a partnership
(“the land transfer”);
(b)
the land transfer falls within paragraph (a), (b) or (c) of
paragraph 10(1);
15
(c)
during the period of three years beginning with the date of
the land transfer, a qualifying event occurs.
      (2)
A qualifying event is—
(a)
a withdrawal from the partnership of money or money’s
worth which does not represent income profit by the
20
relevant person—
(i)
withdrawing capital from his capital account,
(ii)
reducing his interest, or
(iii)
ceasing to be a partner, or
(b)
in a case where the relevant person has made a loan to the
25
partnership—
(i)
the repayment (to any extent) by the partnership of
the loan, or
(ii)
a withdrawal by the relevant person from the
partnership of money or money’s worth which
30
does not represent income profit.
      (3)
For this purpose the relevant person is—
(a)
where the land transfer falls within paragraph 10(1)(a) or
(b), the person who makes the land transfer, and
(b)
where the land transfer falls within paragraph 10(1)(c), the
35
partner concerned or a person connected with him.
      (4)
The qualifying event—
(a)
shall be taken to be a land transaction, and
(b)
is a chargeable transaction.
      (5)
The partners shall be taken to be the purchasers under the
40
transaction.
      (6)
Paragraphs 6 to 8 (responsibility of partners) have effect in relation
to the transaction.

Finance Bill
Schedule 17 — Stamp duty land tax: miscellaneous amendments
Part 1 — Amendments coming into force in accordance with paragraph 16
284

      (7)
The chargeable consideration for the transaction shall be taken to
be—
(a)
in a case falling within sub-paragraph (2)(a), equal to the
value of the money or money’s worth withdrawn from the
partnership, or
5
(b)
in a case falling within sub-paragraph (2)(b)(i), equal to the
amount repaid, and
(c)
in a case falling within sub-paragraph (2)(b)(ii), equal to so
much of the value of the money or money’s worth
withdrawn from the partnership as does not exceed the
10
amount of the loan,

but (in any case) shall not exceed the market value, as at the
effective date of the land transfer, of the chargeable interest
transferred by the land transfer, reduced by any amount
previously chargeable to tax.”
15
Grant of lease to bare trustee
11
For paragraph 3 of Schedule 16 substitute—
“Bare trustee
3     (1)
Subject to sub-paragraph (2), where a person acquires a
chargeable interest as bare trustee, this Part applies as if the
20
interest were vested in, and the acts of the trustee in relation to it
were the acts of, the person or persons for whom he is trustee.
      (2)
Sub-paragraph (1) does not apply in relation to the grant of a lease.
      (3)
Where a lease is granted to a person as bare trustee, he is treated
for the purposes of this Part, as it applies in relation to the grant of
25
that lease, as purchaser of the whole of the interest acquired.
      (4)
Where a lease is granted by a person as bare trustee, he is to be
treated for the purposes of this Part, as it applies in relation to the
grant of the lease, as vendor of the whole of the interest disposed
of.”
30
12
In paragraph 11 of Schedule 17A (cases where assignment of lease treated as
grant of lease), for sub-paragraph (1) substitute—
    “(1)
This paragraph applies where the grant of a lease is exempt from
charge by virtue of any of the provisions specified in sub-
paragraph (3).”
35
Variation of lease
13
In paragraph 15A of Schedule 17A (leases: reduction of rent or term)—
(a)
after sub-paragraph (1) insert—
   “(1A)
Where any consideration in money or money’s worth
(other than an increase in rent) is given by the lessee for
40
any variation of a lease, other than a variation of the
amount of the rent or of the term of the lease, the variation
is treated for the purposes of this Part as an acquisition of

Finance Bill
Schedule 17 — Stamp duty land tax: miscellaneous amendments
Part 1 — Amendments coming into force in accordance with paragraph 16
285

a chargeable interest by the lessee.”, and
(b)
for the heading preceding that paragraph substitute “Reduction of
rent or term or other variation of lease”.
Loan or deposit in connection with grant or assignment of lease
14
After paragraph 18 of Schedule 17A insert—
5
“Loan or deposit in connection with grant or assignment of lease
18A   (1)
Where, under arrangements made in connection with the grant of
a lease—
(a)
the lessee, or any person connected with him or acting on
his behalf, pays a deposit, or makes a loan, to any person,
10
and
(b)
the repayment of all or part of the deposit or loan is
contingent on anything done or omitted to be done by the
lessee or on the death of the lessee,

the amount of the deposit or loan (disregarding any repayment) is
15
to be taken for the purposes of this Part to be consideration other
than rent given for the grant of the lease.
      (2)
Where, under arrangements made in connection with the
assignment of a lease—
(a)
the assignee, or any person connected with him or acting
20
on his behalf, pays a deposit, or makes a loan, to any
person, and
(b)
the repayment of all or part of the deposit or loan is
contingent on anything done or omitted to be done by the
assignee or on the death of the assignee,
25

the amount of the deposit or loan (disregarding any repayment) is
to be taken for the purposes of this Part to be consideration other
than rent given for the assignment of the lease.
      (3)
In the case of a transaction which consists of the grant or
assignment of a lease of residential property, tax is not chargeable
30
by virtue of this paragraph merely because of paragraph 9(2) of
Schedule 5 (which excludes the 0% band in the Tables in section
55(2) in cases where the relevant rental figure exceeds £600 a year).
      (4)
Section 839 of the Taxes Act 1988 (connected persons) has effect for
the purposes of this paragraph.”
35
15
In section 80 (adjustment where contingency ceases or consideration is
ascertained) after subsection (4) insert—
“(4A)
Where the transaction (“the relevant transaction”) is the grant or
assignment of a lease, no claim may be made under subsection (4)—
(a)
in respect of the repayment (in whole or part) of any loan or
40
deposit that is treated by paragraph 18A of Schedule 17A as
being consideration given for the relevant transaction, or
(b)
in respect of the refund of any of the consideration given for
the relevant transaction, in a case where the refund—
(i)
is made under arrangements that were made in
45
connection with the relevant transaction, and