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Finance Act 2014

Section 111: Stamp Duty Land Tax: Threshold for Higher Rate Applying to Certain Transactions


1.This section reduces the starting threshold for the 15 per cent higher rate Stamp Duty Land Tax (SDLT) charge from £2 million to £500,000.

Details of the Section

2.Subsection (1) provides for amendment of Schedule 4A to Finance Act 2003 (higher rate for certain transactions).

3.Subsection (2) amends the definition of “higher threshold interest” for the purposes of Schedule 4A by substituting a threshold of £500,000 for the existing threshold of £2,000,000.

4.Subsection (3) makes consequential amendments wherever the £2,000,000 figure appears.

5.Subsection 4 provides that the measure commences for land transactions where the effective date is on or after 20 March 2014.

6.Subsection 5 provides that (with exceptions set out in subsections (6) and (7)) the £2,000,000 threshold is retained for transactions where contracts were entered into before    20 March 2014.

7.Subsection 6 excludes from the transitional provision at subsection 5 certain transactions where the outcome is different from that provided for in the contract due to an event which occurs on or after 20 March 2014.

8.Subsection 7 applies a transitional rule in cases where a partnership acquires a dwelling and there is a subsequent transfer of a partnership interest or withdrawal of money from the partnership which is treated as a land transaction for SDLT purposes.  In these cases the £2,000,000 threshold applies to the subsequent transfer where the effective date of the earlier acquisition is before 20 March 2014.

Background Note

9.Schedule 4A Finance Act 2003 provides for the 15 per cent higher rate charge to SDLT.  This charge applies to acquisitions of a ‘higher threshold interest’ by a ‘non-natural person’ – that is, a company, a partnership with a corporate member or a collective investment scheme. A ‘higher threshold interest’ is defined as an interest in a single dwelling (together with appurtenant rights) to which chargeable consideration of more than £2,000,000 is attributable.  This section reduces the threshold to £500,000.

10.The 15 per cent higher rate charge was introduced in Finance Act 2012 as part of a package of measures affecting residential property wrapped in corporate and other ‘envelopes’, which is not used for a commercial purpose.  The other measures in the package are the Annual Tax on Enveloped Dwellings (ATED) and ATED-related Capital Gains Tax on disposal of property that was subject to ATED.

11.Acquisitions by trustees or for the purposes of letting, trading or redevelopment, trades involving making a dwelling available to the public, providing dwellings for occupation by certain employees or use as a farmhouse are excluded from the higher rate charge.

12.This section and the related changes to the ATED threshold (sections 109-110) are intended  to tackle tax avoidance and to ensure that those wrapping residential property in corporate and other ‘envelopes’ and not using them for a commercial purpose, such as renting them out, pay a fair share of tax.

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