Mr.
Hoban: Is the Minister therefore saying that DWP payments
will not be taken into account when calculating the threshold test, and
that people will not need to calculate it if there is an increase due
to changes in DWP requirements?
Kitty
Ussher: I do not have the answer to that question, but I
am sure that I will.
David
Wright (Telford) (Lab): They are
included.
Kitty
Ussher: They are included, I am told by some strange
telepathic force. I hope that that answers the question asked by the
hon. Member for Fareham.
On the hon.
Gentleman’s question about the class of pension members, the
class relates to 20 people receiving pensions. It does not matter if
the people in that class change, unless it is done for avoidance
purposes. The test for avoidance relates to whether the people in the
class have changed to avoid the charge. There is an intentional test. I
hope that I have clarified those issues for the Committee, and I
commend the schedule.
Question
put and agreed
to. Schedule
29 agreed
to.
Clause
91Notification
and registration of
transactions
Kitty
Ussher: I beg to move amendment No. 149, in
clause 91, page 52, line 24, leave
out ‘, other than any
rent,’.
The
Chairman: With this it will be convenient to discuss
Government amendments Nos. 150 and
151.
Kitty
Ussher: These are small amendments to ensure that clause
91 and schedule 30 have the effect that we intended when we drafted
them. The Government expected the changes introduced by clause 91 and
schedule 30 to remove the need to notify HMRC of more than 270,000
transactions per year. It is a welcome deregulatory measure. Clause 91
introduces a rent notification threshold of £1,000, which
applies to the grant of leases for a term of seven years or more and
reduces the administrative burden of stamp duty land tax. Previously,
one was required to notify HMRC of a grant of any lease for seven years
or more, provided it was made for a chargeable
consideration. However,
clause 91 also applies the same £1,000 notification trigger in
respect of leases that are assigned or surrendered. The assignment of a
lease refers to the transfer of rights to use leased property, which
can obviously happen periodically as rents are renegotiated. The
requirement to notify the assignment or surrender of leases when the
relevant rent was £1,000 or more, regardless of the size of any
other chargeable consideration for the assignment or surrender, was
added to ensure that the data the Government collect on property
transactions were not harmed by the measure.
However,
since the Bill was published, we have received representations about
the extra reporting that the additional requirement will create. We
are, as always, keen to ensure that we can deregulate wherever possible
and that we do not place additional burdens on business, so we think
that we can collect the data in another way. We have re-examined the
requirement and agreed that we can offset the deregulatory savings if
we proceed as we originally intended.
We believe
that the data collected from the notification of the granting of leases
would not be unduly affected by an amendment that removed the
requirement to notify HMRC of the assignment and surrender of leases
when the relevant rent is £1,000 or more. I trust that the
amendment is uncontroversial.
Mr.
David Gauke (South-West Hertfordshire) (Con): It is a
pleasure to serve under your chairmanship again, Mr. Cook.
The Financial Secretary said earlier that she hoped that the pleasant
weather outside would be reflected in a pleasant environment in this
room. I do not think there will be a great deal of controversy about
this clause. Although we might take issue with the Economic
Secretary’s characterisation of the Government as always keen to
deregulate, this is, none the less, a deregulatory
measure.
We welcome the intention behind
clause 91, which raises the threshold of notification to HMRC of a land
transaction for stamp duty land tax purposes. We also welcome the fact
that the Government have listened to
representations—particularly from the British Property
Federation and the Law Society—that the original wording would
not perhaps have been as successful in reducing the regulatory burden
as was intended. We therefore welcome the fact that the Government have
produced not only the clause, but the amendments.
Indeed, we tabled an amendment on removing the £1,000 rent
requirement that is identical to Government amendment No. 150. Hence,
the entire Conservative Front Bench supports amendment No.
150—such is our enthusiasm for the measure. No doubt, the
Liberal Democrats will make a statement that they are the real
alternative by not putting their name to the
amendment. I
have a couple of questions for the Economic Secretary. The first
question is about the requirement of notification for the
£40,000 threshold—chargeable consideration. Given that
SDLT is payable at £125,000 or £150,000—I would be
grateful if the Economic Secretary will confirm that—I assume
that the £40,000 requirement exists to provide the Government
with property-related information, as opposed to being for the
assessment of SDLT. That would enable the Minister for Housing to share
that information with the Cabinet and, indeed, with passing
cartographers. There
are difficulties in filing a correct SDLT return under section 75A if
the purchaser has no connection with the other parties to the
transaction and therefore cannot obtain the information to complete the
return and self-assessment. I know that representations have been made
to the Treasury on that point, so I should be grateful to know whether
the Government are considering the issue of filing SDLT returns and
whether there are plans to address that concern. In conclusion, we
welcome the clause and the Government’s
amendments.
Kitty
Ussher: The hon. Gentleman raises an important point
because there is obviously tension between the need simply to acquire
information about what is happening in the market for a variety of
Government purposes and the genuine desire to deregulate in relation to
the companies and individuals concerned. The implication in his
question is why the notification threshold is not the same as the
threshold for the tax itself. We need the information collected from
notifications to help other Departments, such as the Land Registry and
valuation offices, to make assessments based on data collected from
returns. Even if no tax is collected on the transactions, there is a
requirement in relation to
that. The
hon. Gentleman mentioned filing under section 75A, and we
will be issuing guidance on that shortly. We do
not believe that a return form is needed; a letter setting out the main
points will suffice. I hope that answers his
question. Amendment
agreed
to. Amendments
made: No. 150, in clause 91, page 52, line 25,
leave out from ‘£40,000’ to end of line
26. No.
151, in
clause 91, page 52, line 33, after
‘consideration’, insert
‘for the
assignment or surrender’.—[Kitty
Ussher.] Clause
91, as amended, ordered to stand part of the
Bill. Schedule
30 agreed
to.
Clause
92Charge
where consideration includes rent: 0%
band 9.45
am
Kitty
Ussher: I beg to move amendment No. 152, in
clause 92, page 54, line 42, at
end insert— ‘( ) In Schedule
9 to that Act (SDLT: right to buy etc), after paragraph 4A
insert— “Shared ownership
lease: grant not linked with staircasing transactions
etc 4B (1) For the purpose of
determining the rate of tax chargeable on the grant of a shared
ownership lease of a dwelling, the grant shall be treated as if it were
not linked to— (a) any
acquisition of an interest in the dwelling to which paragraph 4A
applies, or (b) a transfer of
the reversion to the lessee or lessees under the terms of the
lease. (2) In this paragraph
“shared ownership lease” has the same meaning as in
paragraph 4A.” ( ) In
that Schedule, in paragraphs 10(1) and (2) and 11(b) (shared ownership
trusts), omit
“additional”. ( )
In that Schedule, insert at the
end— “Shared ownership
trust: declaration not linked with staircasing transactions
etc 12 For the purpose of determining
the rate of tax chargeable on the declaration of a shared ownership
trust, the declaration shall be treated as if it were not linked
to— (a) any
equity-acquisition payment under the trust or any consequent increase
in the purchaser’s beneficial interest in the trust property,
or (b) a transfer to the
purchaser of an interest in the trust property upon the termination of
the
trust.”’. The
amendment follows on from the abolition of the so-called £600
rule for residential purchases and amends the stamp duty land tax rules
for shared ownership in schedule 9 to the Finance Act 2003. With the
abolition of the £600 rule for residential property, the premium
paid for a shared ownership lease will no longer attract stamp duty
land tax at 1 per cent. when it is below the threshold of
£125,000, or £150,000 in a disadvantaged area. A special
relief then exempts staircasing transactions that do not take the
purchaser beyond an 80 per cent. share of the property.
The intention
was that shared ownership purchasers would normally pay SDLT only on
purchases that took them beyond 80 per cent. ownership of the property,
but when there is a series of transactions between
the
same vendor and purchaser, the SDLT linked transactions rules set the
rate of stamp duty on each transaction by reference to the aggregate
consideration given in all the transactions. The premium on a shared
ownership purchase and subsequent staircasing transactions are linked
transactions for that purpose. That means that any purchase of a share
in a shared ownership property that takes the buyer over the SDLT
threshold of £125,000, or £150,000 in a disadvantaged
area, would bring the premium back into charge at 1 per cent., even if
it was below the starting threshold. That is the case even if the
purchase does not give the purchaser an 80 per cent. share in the
property and even though the further transaction is itself not
chargeable because it attracts staircasing relief. These matters
are complex, but we have realised that a situation would have been
created that was not the intention of clause 92, so the amendment
disapplies the linked transactions rules as they apply to the premium
paid for a shared ownership lease to keep the premium out of charge
when it is below the starting threshold. The amendment makes a similar
change regarding an initial payment by a beneficiary of a shared
ownership trust that provides shared ownership facilities for
commonhold flats. The amendment will have no Exchequer cost, and I hope
that it has the support of hon. Members on both sides of the
Committee. Amendment
agreed
to. Question
proposed, That the clause, as amended, stand part of the
Bill.
Mr.
Gauke: I thank the Economic Secretary for her clear
explanation of the amendment. I have one question about the clause,
which relaxes the £600 rule that prevents the manipulation of
lease thresholds by entering into leases in which both rent and a
premium are paid. Like many measures, the £600 rule was
introduced as an anti-avoidance measure, and I should like to know what
persuaded the Treasury that it is no longer necessary. What assurances
can the Minister give that the consequence of its repeal will not be
the avoidance behaviour that was the very cause of its
introduction?
Kitty
Ussher: The hon. Gentleman makes a valid point. We have
decided that the risk of manipulation between premiums and rent to
avoid paying SDLT is much greater for non-residential property than for
residential property. The removal of the £600 rule for
residential properties would bring huge benefits to those purchasing a
property through a shared ownership scheme, by ensuring that in the
vast majority of cases they pay stamp duty land tax only on
transactions that take them beyond 80 per cent. ownership of the
property. We were advised, for example, by the Chartered Institute of
Taxation that retention of the £600 rule for non-residential
property is disproportionate to the level of possible abuse. We are
trying to balance the risks, and we are comfortable that there is no
major incentive to abuse the
provision. Question
put and agreed
to. Clause
92, as amended, ordered to stand part of the
Bill.
Clause
93Withdrawal
of group
relief
Kitty
Ussher: I beg to move amendment No. 153, in
clause 93, page 55, line 36, at
end insert
‘(but see
sub-paragraph
(6A))’.
The
Chairman: With this it will be convenient to discuss the
following: Government amendment No.
154 Amendment
No. 187, in clause 93, page 56, leave out
lines 4 to
6. Amendment
No. 159, in
clause 93, page 56, line 6, at
end insert— ‘(8) The
provisions of sub-paragraph (4) shall not apply unless, at the
effective date of the transaction, there are arrangements in existence
by virtue of which, at that time or some later time, a person has or
could obtain, or any persons together have or could obtain, control of
the purchaser but not of the
vendor.’. Government
amendments Nos. 155 to
158.
Kitty
Ussher: I shall speak to the Government amendments, which
in many cases will resolve some of the issues raised by both Opposition
parties. I assume that Opposition Members wish to speak to their own
amendments, so I shall respond to them in detail when they have done
so, rather than pre-empt them. I shall instead explain what we are
trying to do with our amendments, which might lead us on to what other
hon. Members wish to
propose. Clause
93 has been introduced to close a loophole that has been widely used to
avoid paying stamp duty land tax. Following its announcement in the
Budget, a number of representations were submitted by the industry
detailing concerns about parts of the operation of the clause. In
particular, there was uncertainty about how the legislation will be
applied in practice and concerns that it might catch innocent
transactions. The legislation is not intended to disadvantage genuine
taxpayers, so the Government amendments have been introduced to ensure
that the legislation operates as intended and to provide the certainty
sought by the
industry. Some
representations suggested that the clause is retrospective, which is
not the case. It is not intended to penalise anyone who has acted on
the basis of existing legislation, so Government amendment No. 158 has
been introduced to ensure that the provision applies only to transfers
of assets occurring after Budget day. Concern was also expressed about
the meaning of “control” in the clause—this may
relate to amendment No. 187, in the name of the Liberal Democrat
Members. The word “control” has been used in this context
for many decades, but it has been suggested that a change in control of
the purchasing company might be inadvertently triggered resulting in a
clawback of group relief. I would expect a property group to take the
necessary legal steps to pre-empt such a possibility, without being
caught by the legislation.
Having
considered the representations, however, I wish to provide greater
certainty in two specific areas, which might pre-empt some of the
points that may be made. The first point relates to a change in control
arising as a result of refinancing where the finance is not provided by
a bank. Such a finance provider is defined in legislation as a loan
creditor. In certain
circumstances, financing obtained from a loan creditor would trigger a
change in control, which might present difficulties to groups seeking
refinancing. That is not the Government’s intention, so we have
proposed an amendment to introduce an exclusion that will ensure that
financing obtained from a loan creditor will not result in a change of
control for the purposes of clawing back group relief. We have also
proposed the introduction of a similar exclusion elsewhere in schedule
7 to the Finance Act 2003 to ensure consistency across the group relief
legislation. Those two measures refer to Government amendments Nos. 153
and 154. Government
amendments Nos. 155 to 157 are consequential and address the second
area of concern, which is that HMRC might construe the meaning of a
change of control so widely that the change of one shareholder in a
quoted company might result in a change of control and, therefore,
trigger the clawback provision. Similar concerns were raised in
relation to reconstruction relief. I can confirm that we intend to take
the same approach—if control of a publicly owned company changes
as a result of an ordinary market transfer of its shares, there will be
no recovery, because we do not intend to interpret change of control so
widely that simple day-to-day transactions by unconnected minority
shareholders in the stock exchange could trigger a clawback. We will
issue guidance shortly to confirm that
view. In
conclusion, the Government amendments will provide the certainty sought
by the industry, while ensuring that the loophole exploited by those
seeking to avoid their share of tax will be closed. The amendments will
have no Exchequer costs or revenue implications and will be welcomed by
a wide range of practitioners and the industry. I shall stop now to
allow others to speak to their amendments and then I will wrap up the
debate.
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