Budget zone

Budget 2008: Stamp Duty

Shared ownership schemes

SDLT will not be payable on shared ownership homes until the buyer acquires the final 20 per cent of their home.

Notification thresholds for land transactions and rate
thresholds for leasehold property

SDLT thresholds

HMRC must be notified about most transactions involving the acquisition of a major interest in land for consideration unless specifically exempted. The Budget proposes raising the threshold for notifying HMRC of a land transaction from £1,000 to £40,000.

Transactions involving leases for a term of seven years or more will only have to be notified where any chargeable consideration other than rent is more than £40,000 or where the annual rent is more than £1,000.

It will no longer be necessary to complete either a stamp duty land tax return (HMRC form SDLT1) or certificate that no stamp duty land tax is due (HMRC form SDLT 60) if the transaction is below the notifiable threshold.

The “£600 rule”

Provisions in the Finance Act 2003 prevent the manipulation of lease thresholds and apply to leases where payment is made by both rent and a premium when the lease is signed. Currently, where the annual rent on a lease is more than £600, then the normal 0 per cent thresholds that would have effect, £125,000 for residential property and £150,000 for non-residential property, are withdrawn and SDLT is charged at 1 per cent.

The Budget proposes amendments to these rules as follows:
• for non-residential properties where the annual rent on a lease is £1,000 or more then the normal 0 per cent threshold that would have effect at £150,000 is withdrawn and SDLT is charged at 1 per cent; and
• for residential properties the rule will no longer have effect and, regardless of what rent is paid, the normal thresholds will have effect to any premium paid. This amendment will also have effect in respect of
disadvantaged areas relief.

Form SDLT 60)

The HMRC form prescribed by regulations does not currently permit agents to sign the certificate that no SDLT is due on behalf of their clients (form SDLT 60). Only the person making the transaction can sign the form. HMRC will amend that form by regulations later in 2008 so that agents will be able to sign the declaration in the certificate on behalf of their clients.

Minimum £5 stamp duty abolished

Good news for company registrars and firms offering company secretarial services! The minimum £5 stamp duty on instruments transferring stocks and shares will be abolished from 13 March 2008. From that date, there will be a consideration threshold of £1000 beneath which instruments transferring stocks and securities will no longer need to be stamped; the £5 fixed charge on certain instruments will also be abolished. (Note that transfers of securities where no instrument is executed will continue to be liable to SDRT as before). This will mean that around 220,000 documents submitted for stamping each year will no longer have to be presented to HMRC, saving £13m in administrative costs compared with a loss of revenue of just £1.1m – the sort of thing we would call a “no brainer”!

Change to loan capital exemption

Most forms of loan capital are exempt from stamp duty but where the right to interest on a loan capital instrument is determined to any extent by the results of a business or value of any property, the exemption does not apply and transfers of that loan capital are subject to ad valorem stamp duty.

From Royal Assent where the loan capital instrument does not meet the current exemption criteria it will nevertheless qualify for exemption from stamp duty if it is also (a) party to a capital market arrangement and (b) the right to interest is on limited recourse terms.

Stamp duty land tax relief for new zero-carbon flats

The from SDLT for new zero-carbon homes will be extended to
cover new zero carbon flats with retrospective effect from 1 October 2007. The relief will be time-limited and will expire on 30 September 2012.

Anti-avoidance legislation affecting partnerships

The Finance Bill 2008 will amend provisions inserted in Finance Act (FA) 2003 by FA 2007 to ensure that, where there is a transfer of an interest in a property within an investment partnership, there will be no charge to SDLT. This will be made effective from 19 July 2007.

Group relief anti-avoidance

Legislation will be introduced in Finance Bill 2008, effective from 13 March 2008, to amend provisions that enable groups to transfer assets within a group and then sell the purchasing company on to a third party without incurring SDLT.

Alternative finance anti-avoidance

Provisions were made in the Finance Act 2003 to encourage the use of alternative finance structures that did not use conventional mortgage schemes to buy property. The Treasury believes that some financial institutions have misused SDLT exemptions by colluding with vendors so that ownership of a property is placed in a subsidiary company of the financial institution. The subsidiary then claims that the transaction is intended for the purposes of allowing the equivalent of mortgaging on a mortgage free property or re-mortgaging. Once ownership of the property has passed from the vendor to the subsidiary, however, the financial institution can then sell the property
without incurring any SDLT by selling shares in the subsidiary company. FA 2008 will close this loophole.

Anti-avoidance: disclosure rules

The Government announced today that, following consultation, it will extend the SDLT disclosure rules to residential property worth at least £1m. This will be enacted by secondary legislation later this year, following consultation on the detail.