Stamp duties

Notification thresholds and the '£600' rule

Currently stamp duty land tax (SDLT) is charged at varying rates on the consideration given for a land transaction, residential property transaction that does not exceed £125,000 and on transactions in non-residential property if the consideration does not exceed £150,000.

Tax is payable at higher rates for higher value transactions up to a maximum of 4%. A lease must be notified if it is for a period of seven years or more and the grant is made for a chargeable consideration. Most of these transactions have to be notified to HM Revenue and Customs. In future notification will not be necessary for non-leasehold transactions where the consideration is less than £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.

The £600 rule:

The Finance Act 2003 states that where the annual rent on a lease is more than £600, then the normal 0% thresholds that would have effect, £125,000 for residential property and £150,000 for non-residential property, are withdrawn and SDLT is charged at 1%. The following changes will be introduced:

  1. for non residential properties where the annual rent on a lease is £1,000 or more then the normal 0% threshold that would have effect at £50,000 is withdrawn and SDLT is charged at 1%; and
  2. 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.

These changes will have effect for transactions on and after 12 March 2008.

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Property investment partnerships: anti avoidance

Legislation will be introduced to amend Finance Act 2007 provisions (which amended the Finance Act 2003) 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. These changes apply retrospectively for transactions that occurred on and after 19 July 2007.

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Stamp duty exemption: '£5 duty'

Currently the law provides for ad valorem stamp duty to be charged on an instrument transferring shares on sale, at the rate of 0.5 % of the amount of the consideration, rounded up the nearest £5. Where the consideration is £1,000 or less, the duty payable is therefore limited to £5. There is also a fixed £5 stamp duty charge for instruments transferring shares otherwise than on a sale. Currently, this relates to 68% of transfer instruments. From 13 March 2008 these transactions will be exempt from stamp duty and instruments will not need to be presented to HM Revenue and Customs for stamping before submission to Companies House.

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Zero-carbon flats

A zero-carbon home relief introduced last year is now extended to include zero carbon flats, and will be available for the period from 1 October 2007 to 30 September 2012. The relief will provide elimination of SDLT liabilities for all new zero-carbon flats up to a purchase price of £500,000. Where the price is in excess of £500,000 the SDLT liability will be reduced by £15,000. The relief will be eligible only to new flats which are liable to SDLT on their first sale. The relief will not be available on second and subsequent sales or on existing flats when converted to meet the zero-carbon criteria. Qualifying criteria for the relief can be found on HM Revenue and Customs website. Government departments will be able to charge a fee for assessing whether the home meets the zero carbon standard.

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Loan capital exemption

The Finance Bill 2008 will include draft legislation that will provide exemption from stamp duty on transfers of loan capital, which are subject to a capital market arrangement on limited recourse terms. Currently section 79(4) of Finance Act 1986 exempts from stamp duty most forms of loan capital. 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. The new measures will provide that where the loan capital instrument does not meet the current exemption criteria, it will nevertheless qualify for exemption from stamp duty.

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Alternative finance

From the date of the 2008 Finance Act alternative finance investment bonds will be classified as loan capital for stamp duty purposes. By classifying these bonds as debt securities the changes will align the stamp duty treatment of these investments. These bonds may then benefit from the loan capital exemption.

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ther stamp duty changes not covered in this report

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