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Finance Act 2014

Section 112: SDLT: Exercise of Collective Rights by Tenants of Flats


1.Section 112 extends the reduction in the starting threshold for the 15% higher rate Stamp Duty Land Tax (SDLT) charge from £2 million to £500,000, introduced by section 111 of Finance Act 2014, to the SDLT relief for the exercise of collective rights by tenants of flats.

Details of the Section

2.Subsection (1) amends section 74 of Finance Act 2003 by substituting “£500,000” for “£2,000,000” in each place where it occurs.

3.Subsection (2) provides that the measure commences for land transactions where the effective date is on or after 1 July 2014.

4.Subsection (3) provides that (with exceptions set out in subsection (4)) the £2,000,000 threshold is retained for transactions where contracts were entered into before                        20 March 2014.

5.Subsection (4) excludes from the transitional provision at subsection (3) 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.

Background Note

6.Section 74 Finance Act 2003 provides SDLT relief for lessees of flats who collectively acquire the freehold of their block under rights afforded by the Landlord and Tenant Act 1987 and the Leasehold Reform, Housing and Urban Development Act 1993. The relief sets the rate of SDLT according to the consideration given for the freehold divided by the number of flats. This brings the amount of SDLT paid by lessees more into line with what they might have paid had they been able to acquire the freehold of their flat separately.

7.These acquisitions are commonly undertaken by a company in which the lessees are shareholders. In these circumstances the 15% higher rate SDLT charge at Schedule 4A Finance Act 2003 will apply if the mean consideration exceeds the higher rate threshold.

8.Section 111 of Finance Act 2014 reduces the higher rate threshold from £2,000,000 to £500,000 for transactions where the effective date is on or after 20 March 2014.  However section 111 omitted to apply the reduction to the relief at section 74 Finance Act 2003.  This section rectifies this omission.

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