Finance Bill

House of Commons

Session 2005 - 06
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Finance Bill

Finance Bill
Schedule 10 — Stamp duty land tax: miscellaneous amendments
Part 1 — Amendments coming into force in accordance with paragraph 16
146

transaction by the purchaser in relation to the previous
transaction, and
(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
5
charge by virtue of paragraph 1, 7 or 8.
      (3)
For the purposes of sub-paragraph (1)(a) there is a change in the
control of a company if—
(a)
any person who controls the company (alone or with
others) ceases to do so,
10
(b)
a person obtains control of the company (alone or with
others), or
(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.
15
      (4)
If two or more transactions effected at the same time are the
earliest previous transactions falling within sub-paragraph (2), the
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.
20
      (5)
In this paragraph “arrangements” includes any scheme,
agreement or understanding, whether or not legally enforceable.”
7
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
25
the same group as the vendor), as read with paragraph 4A of that Schedule”.
Reconstruction and acquisition reliefs
8
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
30
(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.
35

In this sub-paragraph “trade” has the same meaning as in
the Taxes Act 1988.”
9
In paragraph 9 of Schedule 7 (withdrawal of reconstruction or acquisition
relief) for sub-paragraph (2) substitute—
    “(2)
The amount chargeable is the tax that would have been chargeable
40
in respect of the relevant transaction but for reconstruction or
acquisition relief if the chargeable consideration for that
transaction had been an amount equal to—
(a)
the market value of the subject-matter of the transaction,
and
45
(b)
if the acquisition was the grant of a lease at a rent, that rent,

Finance Bill
Schedule 10 — Stamp duty land tax: miscellaneous amendments
Part 1 — Amendments coming into force in accordance with paragraph 16
147


or, as the case may be, an appropriate proportion of the tax that
would have been so chargeable.”
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
5
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);
10
(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
15
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
20
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
25
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
30
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
35
transaction.
      (6)
Paragraphs 6 to 8 (responsibility of partners) have effect in relation
to the transaction.
      (7)
The chargeable consideration for the transaction shall be taken to
be—
40
(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

Finance Bill
Schedule 10 — Stamp duty land tax: miscellaneous amendments
Part 1 — Amendments coming into force in accordance with paragraph 16
148

(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
5
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.”
10
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
15
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
20
the 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.”
25
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).”
30
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
35
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
a chargeable interest by the lessee.”, and
(b)
for the heading preceding that paragraph substitute “Reduction of
40
rent or term or other variation of lease”.

Finance Bill
Schedule 10 — Stamp duty land tax: miscellaneous amendments
Part 1 — Amendments coming into force in accordance with paragraph 16
149

Loan or deposit in connection with grant or assignment of lease
14
After paragraph 18 of Schedule 17A insert—
“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—
5
(a)
the lessee, or any person connected with him or acting 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
10
lessee or on the death of the lessee,

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 grant of the lease.
      (2)
Where, under arrangements made in connection with the
15
assignment of a lease—
(a)
the assignee, or any person connected with him or acting
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
20
contingent on anything done or omitted to be done by the
assignee or on the death of the assignee,

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.
25
      (3)
Sub-paragraph (1) or (2) does not apply in relation to a deposit if
the amount that would otherwise fall within the sub-paragraph in
question in relation to the grant or (as the case requires)
assignment of the lease is not more than twice the relevant
maximum rent.
30
      (4)
The relevant maximum rent is—
(a)
in relation to the grant of a lease, the highest amount of
rent payable in respect of any consecutive twelve month
period in the first five years of the term;
(b)
in relation to the assignment of a lease, the highest amount
35
of rent payable in respect of any consecutive twelve month
period in the first five years of the term remaining
outstanding as at the date of the assignment,

the highest amount of rent being determined (in either case) in the
same way as the highest amount of rent mentioned in paragraph
40
7(3).
      (5)
Tax is not chargeable by virtue of this paragraph—
(a)
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), or
45
(b)
merely because of paragraph 5(4)(b), 6(6)(b), 9(4)(b) or
10(6)(b) of Schedule 6 (which make similar provision in
relation to land which is wholly or partly residential

Finance Bill
Schedule 10 — Stamp duty land tax: miscellaneous amendments
Part 1 — Amendments coming into force in accordance with paragraph 16
150

property and is wholly or partly situated in a
disadvantaged area).
      (6)
Section 839 of the Taxes Act 1988 (connected persons) has effect for
the purposes of this paragraph.”
15
In section 80 (adjustment where contingency ceases or consideration is
5
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
deposit that is treated by paragraph 18A of Schedule 17A as
10
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
connection with the relevant transaction, and
15
(ii)
is contingent on the determination or assignment of
the lease or on the grant of a chargeable interest out of
the lease.”
Commencement
16    (1)
Subject to sub-paragraph (7), paragraphs 3 to 7 have effect where the
20
effective date of the relevant transaction (within the meaning of paragraph
3 or 4A of Schedule 7 to FA 2003) is after 19th May 2005.
      (2)
Subject to sub-paragraph (7), paragraph 9 has effect where the effective date
of the relevant transaction (within the meaning of paragraph 9 of Schedule
7 to FA 2003) is after 19th May 2005.
25
      (3)
Subject to sub-paragraph (7), paragraph 10 has effect where the effective
date of the transaction transferring the chargeable interest to the partnership
is after 19th May 2005.
      (4)
Subject to sub-paragraph (7), paragraphs 11 and 12 have effect where the
effective date of the land transaction consisting of the grant of the lease is
30
after 19th May 2005.
      (5)
Subject to sub-paragraph (7), the amendments made by the other provisions
of this Part of this Schedule have effect in relation to any transaction of which
the effective date is after 19th May 2005.
      (6)
In sub-paragraphs (7) and (8) “the specified date” means—
35
(a)
in relation to the amendments made by paragraphs 4(a) and 9, 19th
May 2005, and
(b)
in relation to the amendments made by the other provisions of this
Part of this Schedule, 16th March 2005.
      (7)
The amendments made by this Part of this Schedule do not have effect—
40
(a)
in relation to any transaction which is effected in pursuance of a
contract entered into and substantially performed on or before the
specified date, or
(b)
subject to sub-paragraph (8), in relation to any other transaction
which is effected in pursuance of a contract entered into on or before
45
the specified date.

Finance Bill
Schedule 10 — Stamp duty land tax: miscellaneous amendments
Part 2 — Amendments coming into force in accordance with paragraph 22
151

      (8)
The exclusion by sub-paragraph (7)(b) of transactions effected in pursuance
of contracts entered into on or before the specified date does not apply—
(a)
if there is any variation of the contract or assignment of rights under
the contract after that date,
(b)
if the transaction is effected in consequence of the exercise after that
5
date of any option, right of pre-emption or similar right, or
(c)
if 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 entitled to call for a conveyance to him.
10
      (9)
In this paragraph “assignment”, “effective date” and “substantially
performed” have the same meaning as in Part 4 of FA 2003.
Part 2
Amendments coming into force in accordance with paragraph 22
Introduction
15
17
Part 4 of FA 2003 (stamp duty land tax) is amended in accordance with this
Part of this Schedule.
Transfers involving public bodies
18
In section 66 of FA 2003 (transfers involving public bodies) after subsection
(5) insert—
20
“(6)
In this section “company” means a company as defined by section
735(1) of the Companies Act 1985 or Article 3(1) of the Companies
(Northern Ireland) Order 1986.”
Group relief: avoidance arrangements
19
In paragraph 2 of Schedule 7 (restrictions on availability of group relief) after
25
sub-paragraph (4) insert—
   “(4A)
Group relief is not available if the transaction—
(a)
is not effected for bona fide commercial reasons, or
(b)
forms part of arrangements of which the main purpose, or
one of the main purposes, is the avoidance of liability to
30
tax.

“Tax” here means stamp duty, income tax, corporation tax, capital
gains tax or tax under this Part.”
Acquisition relief: avoidance arrangements
20
In paragraph 8 of Schedule 7 (acquisition relief)—
35
(a)
for sub-paragraph (5) substitute—
    “(5)
For this purpose companies are associated if one has
control of the other or both are controlled by the same
person or persons.

The reference to control shall be construed in accordance
40
with section 416 of the Taxes Act 1988.”, and

Finance Bill
Schedule 10 — Stamp duty land tax: miscellaneous amendments
Part 2 — Amendments coming into force in accordance with paragraph 22
152

(b)
after sub-paragraph (5A) (inserted by paragraph 8 of this Schedule)
insert—
   “(5B)
The fourth condition is that the acquisition is effected for
bona fide commercial reasons and does not form part of
arrangements of which the main purpose, or one of the
5
main purposes, is the avoidance of liability to tax.

“Tax” here means stamp duty, income tax, corporation tax,
capital gains tax or tax under this Part.”
     (5C)
In this paragraph “arrangements” include any scheme,
agreement or understanding, whether or not legally
10
enforceable.”
Stamp duty on transfers of partnership interests
21    (1)
In Schedule 15 (stamp duty land tax: partnerships), paragraph 33 (which
relates to stamp duty on transfers of partnership interests) is amended as
follows.
15
      (2)
For sub-paragraphs (1) and (2) substitute—
    “(1)
This paragraph applies where stamp duty under Part 1 of
Schedule 13 to the Finance Act 1999 (transfer on sale) is, apart from
this paragraph, chargeable on an instrument effecting a transfer of
an interest in a partnership.
20
     (1A)
If the relevant partnership property does not include any stock or
marketable securities, no stamp duty shall (subject to sub-
paragraph (8)) be chargeable on the instrument.”
      (3)
In sub-paragraph (3)—
(a)
at the beginning insert “If the relevant partnership property includes
25
stock or marketable securities,”,
(b)
in paragraph (a), for the words from “the stock” to “property”
substitute “that stock and those securities”, and
(c)
for paragraph (b) substitute—
“(b)
the consideration for the transfer were equal to the
30
appropriate proportion of the net market value of
that stock and those securities immediately after
the transfer.”
      (4)
After sub-paragraph (3) insert—
   “(3A)
The “relevant partnership property”, in relation to a transfer of an
35
interest in a partnership, is the partnership property immediately
after the transfer, other than any partnership property that was
transferred to the partnership in connection with the transfer.”
      (5)
Omit sub-paragraph (4).
      (6)
In sub-paragraph (5), for “That” substitute “The appropriate”.
40
Commencement
22    (1)
Subject to sub-paragraph (2), paragraphs 18 to 20 have effect in relation to
any transaction of which the effective date is on or after the day on which
this Act is passed.