Commentary on Sections
Section 1
21.Section 1 amends section 55 Finance Act 2003, which provides rules for calculating the amount of SDLT chargeable, and introduces the Schedule.
22.The section inserts new subsections (1B) and (1C) in section 55. New subsection (1B) provides that the amount of tax due in respect of a transaction comprising wholly residential property is to be calculated by applying each rate of tax to the appropriate part of the relevant consideration and adding together the different amounts. It substitutes a new Table A in section 55 setting out the rates and thresholds to be used.
23.New subsection (1C) provides that the amount of tax due in respect of a transaction which is one of a number of linked transactions comprising wholly residential property is to be calculated by applying each rate of tax to the appropriate part of the relevant consideration (which in this case is the aggregate chargeable consideration for all the linked transactions), adding together the different amounts, and then apportioning the resulting amount to the transaction in proportion to its share of the relevant consideration.
24.The section amends subsection (2) of section 55 to ensure that the existing calculation rules continue to apply to a transaction, or linked transactions, which consist of or include land that is not residential property.
Section 2
25.Section 2 provides that the amendments made by the Act (principally the new calculation rules) apply to transactions where the effective date (in most cases the date of completion) is on or after 4 December 2014.
26.The section provides that the purchaser may elect that in certain circumstances the new calculation rules do not apply. The first of these is where contracts were exchanged before 4 December 2014 and the contract was “substantially performed” (that is, the purchaser occupied the property or paid over the whole, or substantially the whole, of the consideration) before that date. The purpose of this is to protect a subsequent transaction on completion of the contract, on which further tax may be due.
27.The election may also be made in other cases where contracts were exchanged before 4 December 2014 and the contract is completed on or after that date, provided that there is no event on or after that date, of a kind listed at subsection (5), which results in the effect of the contract on completion being different from the effect of the contract when first entered into.
28.An election must be made in a land transaction return or an amendment to such a return and must meet any requirements specified by the Commissioners for Her Majesty’s Revenue and Customs.
Schedule
29.The Schedule aims to make Part 4 Finance Act 2003 consistent with the substantive changes made by section 1 of the Act. In particular, it makes consequential amendments to SDLT provisions at section 74, section 75, Schedule 6B and Schedule 7 Finance Act 2003 which operate to reduce or limit the amount of tax due in respect of a transaction, rather than exempting it from charge altogether.
30.Section 74 Finance Act 2003 provides relief where lessees of flats exercise certain statutory rights collectively to purchase the freehold of their block. The existing relief sets the rate of SDLT according to the consideration given for the freehold divided by the number of qualifying flats. The Schedule provides that the amount of tax due is to be arrived at by dividing the consideration given for the freehold by the number of qualifying flats, calculating the amount of tax due on that sum and multiplying the result by the number of qualifying flats.
31.Section 75 Finance Act 2003 provides relief where members of a crofting community in Scotland exercise a statutory right to purchase their crofts in a single transaction through a community body. The existing relief sets the rate of SDLT according to the consideration given for the transaction divided by the number of crofts bought. The Schedule provides that the amount of tax due is to be arrived at by dividing the consideration given by the number of crofts, calculating the amount of tax due on that sum and multiplying the result by the number of crofts bought.
32.Schedule 6B Finance Act 2003 provides relief where multiple dwellings are acquired in a single transaction or in linked transactions. The existing relief sets the rate of SDLT according to the total consideration given for the dwellings divided by the number of dwellings, subject to a minimum rate of 1%. The present Schedule provides that the amount of tax due is to be arrived at by dividing the consideration given for the dwellings by the number of dwellings, calculating the amount of tax due on that sum and multiplying the result by the number of dwellings. If the resulting amount of tax is less than 1% of the total dwellings consideration, the latter figure is substituted. For linked transactions, the amount of tax is then apportioned to each transaction in proportion to its share of the total dwellings consideration.
33.Schedule 7 Finance Act 2003 provides (inter alia) acquisition relief, which applies where a land transaction is entered into as part of the transfer of a business undertaking. The effect of the relief is to restrict the rate of SDLT on such transactions to 0.5%, which is the rate of stamp duty or stamp duty reserve tax which would apply to a transfer of shares in such an undertaking. The present Schedule provides that the amount of SDLT charged is limited to 0.5% of the chargeable consideration for the transaction.
34.The Schedule makes a number of minor consequential amendments to SDLT legislation, mainly to replace references to a rate of tax with references to an amount of tax.
