On 6th December 2006 the Treasury made regulations – the Stamp Duty Land Tax (Variation of the Finance Act 2003) Regulations 2006 – with immediate effect for a period of eighteen months by which time they will be replaced by legislation in the Finance Act 2007. Apparently, the Treasury is empowered to legislate in this fashion by section 109 of the Finance Act 2003. The first change provides that where a person disposes of a chargeable interest in favour of another person and a number of transactions are involved in that disposal and the SDLT chargeable on all the transactions is less than that which would have been chargeable on a single land transaction then those transactions are disregarded and there is a notional land transaction in which the chargeable consideration is the total consideration given or received. This will affect such schemes as (a) the grant of a lease that gives the landlord a right to terminate the lease within a set period where that period expires without the landlord exercising that right and in return the tenant paying the landlord a sum of money (b) where A agrees to sell property to B Ltd on completion of which B Ltd transfers the property to its parent company, C Ltd by way of a dividend in specie (c) V grants a lease for 999 years at a peppercorn rent to an unconnected nominee, N. V then assigns the freehold reversion to P and P pays N a sum of money in consideration of an agreement by N to vary the lease by inserting a provision giving P the right to terminate the lease.
The second change is to make a number of changes to schedule 15 of the Finance Act 2003 dealing with transfers into and out of partnerships and transfers of partnership interests. The detailed changes are as follows:-
· When calculating the ‘sum of the lower proportions’ for the purposes of paragraphs 10, 11, 18 or 19 of Schedule 15, partners that are connected with ‘relevant owners’ but which are not individuals are not treated as ‘corresponding partners’ in relation to that relevant owner.
· However, on a transfer into a partnership which is subject to paragraph 10 of Schedule 15, relief similar to group relief can be claimed so that the tax payable is reduced to what it would have been if companies which were members of the same group as a relevant owner were treated as corresponding partners in relation to that relevant owner. There are claw back provisions similar to those applying to group relief.
· Where there is a transfer of a partnership interest and the transferee is connected with the transferor but is not an individual then there is a charge under paragraph 14 of Schedule 15 regardless of whether consideration is given.
The application of the group relief provisions to transfers of partnership interests is clarified to put it beyond doubt that group relief claimed on such a transfer is subject to the claw-back provisions in paragraph 3 of Schedule 7 Finance Act 2003.
This is a news item prepared at short notice and without specialist referral and is not an authoritative statement of the new rules but is rather a notice to draw the attention of practitioners to the existence of the new rules which should be consulted directly before coming to any conclusions as to their effect