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BUDGET 2008 NEWS |
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Stamp taxes Stamp duty De minimis charge See TM ¶9546 Some welcome news was that stamp duty, on transactions where the minimum of £5 is payable, is to be removed. This means that any transactions valued at £1,000 or less will be exempt. This includes transferring shares otherwise than on sale. HMRC estimates that this will affect 68% of transactions.
Changes to loan capital exemption See TM ¶9549 The other changes to stamp duty both related to the loan capital exemption. Firstly, the exemption has been extended to include transfers of loan capital which are subject to capital market arrangements, and rights are limited on recourse terms. Currently the exemption does not apply where the right to interest on a loan capital instrument is determined by results of business or the value of a property.
Secondly, Sukuk, which is an Islamic finance investment bond, will now be treated as loan capital for the purposes of stamp duty, and will therefore be exempt.
Stamp duty land tax Zero carbon flats See TM ¶9410 As Tax Memo online users will be aware, the government announced last year that they were considering extending the zero-rating of new zero carbon houses to new flats. It has been announced in the budget that this will now occur, and will be back dated to 1 October 2007. It is intended that this relief will run until at least 30 September 2012, and will apply to the first sale of zero-carbon flats up to the value of £500,000. If a zero-carbon flat is sold for more than £500,000, the SDLT charge will be reduced by £15,000. The other conditions for zero-rating will be the same as for zero carbon houses.
It has also been announced that it is intended that legislation will be enacted that will allow a government department to make a “reasonable charge” to the vendor of the flat, and presumably for zero carbon houses as well, if they carry out an assessment to establish if the property is zero carbon.
Land transaction return See TM ¶9428 The Finance Bill 2008 will include new provisions, with effect from 12 March 2008, exempting the following transactions from the requirement to submit a land transaction form.
· Non-lease acquisitions where the chargeable consideration is less than £40,000; · Transactions involving leases of 7 years or more where the chargeable consideration, other than rent is £40,000, or the annual rent is less than £1,000.
It will no longer be necessary to submit either stamp duty land tax returns, or certificates confirming no stamp duty is payable if the transaction value is below the land transaction return threshold. . Also included were provisions, effective from the 12 March 2008, for situations where both a premium and annual rent are payable: · For non-residential properties, where the annual rent is £1,000 or more, the £150,000 0% threshold is withdrawn and SDLT is charged on the premium at 1%; · For residential properties, regardless of what rent is paid, the normal thresholds will have effect on any premium paid. This includes properties in disadvantaged areas.
Shared ownership Changes to the SDLT rules are to be made to ensure that in the vast majority of cases, buyers of shared ownership properties will only pay SDLT on acquiring the final 20% of the property. No further details were provided.
Anti-avoidance provisions Disclosure rules for residential property The SDLT disclosure rules are to be extended to cover residential property worth at least £1 million. This will be enacted by secondary legislation later this year. HMRC want to monitor residential property transactions at the higher end of the market where special purposes vehicles (SPVs) are being used to take the transaction outside the scope of SDLT.
If an SPV is set up to hold a property for a beneficial owner, it is possible for the buyer to acquire the shares in the SPV that holds property, rather than directly acquiring the land. In this case the buyer will only incur stamp duty at 0.5%, rather than SDLT at 4%.
Groups If a property is transferred to another company within an SDLT group, there is no SDLT charge. There are existing anti-avoidance provisions in place where SDLT relief is clawed back if the acquiring company leaves the group within 3 years of the date of transfer. Before the budget, it was possible for the vendor to leave the group, and for the shares in the acquiring company to subsequently be sold (along with the underlying property) meaning the property was effectively being sold SDLT free. For transactions entered into on, or after 13 March 2008, this will no longer be possible where the vendor company leaves the SDLT group and within 3 years from that date there is a change in control of the acquiring company. If this occurs there will be a claw back of the SDLT relief obtained on the initial transfer.
Investment partnerships It was announced that the finance bill will include provisions to make the transfer of an interest in a property within an investment partnership exempt from SDLT. This change will be retrospective to 19 July 2007 (the date of Royal Assent for FA 2007) as the provisions of FA 2007 had the unintended affect that, when ownership interests were transferred by taxpayers selling their investment in a partnership which held a property, a SDLT charge arose.
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