Partner Article

Stamp duty and SDLT

In this edition of Baker Tilly’s weekly round-up of the most important tax news, we look at this month’s Draft Finance Bill and find out who the real winners and losers were…

The stamp duty changes are very much as announced by the Chancellor in the Autumn Statement.

However, the Draft Finance Bill changes to Charity relief come, at first blush, as a major shock. In the Court of Appeal, Lord Justice Lewinson suggested that the legislation would achieve its intended purpose if the following four words were inserted: ‘to the extent that’.

HMRC accepted the decision of the Court of Appeal and published a note to that effect on the 19th August. Changes to SDLT legislation may be made relatively simply by way of regulation.

However, the delay in announcing the amendments that are to give effect to the decision of the Court on the 26 June 2013, and to protect against any potential abuse, would appear to be the need to carefully craft four pages of legislation.

As the new legislation is not to take effect until sometime early next summer (probably mid-July 2014), the existing legislation with the Court of Appeal’s gloss applies until then. Quite bizarre!

The draft legislation does highlight a further issue - the vexed issue of the rate structure. Where a person acquires a property and the amount to be paid exceeds a set threshold, the entire sum becomes chargeable at the higher rate. This is commonly referred to as the ‘slab system’.

As well as leading to the need to consider whether any part of the amount to be paid can be allocated to something not chargeable to SDLT (such as chattels commonly, but potentially confusingly, referred to as fixtures) it also requires consideration as to whether transactions are linked.

In the case of the joint purchase of a property with a Charity, the legislation operates on the basis that although the part that the Charity acquires is free of SDLT (Stamp Duty Land Tax), it needs to be taken into account in determining what rate of tax to apply to the other part. This would not necessarily be the case of the interests were separated by the vendor.

There will continue to be a need to carefully consider the structure of any proposed transaction to avoid unnecessary additional SDLT costs.

This was posted in Bdaily's Members' News section by Baker Tilly .