Finance Act 2003

Section 70

SCHEDULE 9 U.K. Stamp duty land tax: right to buy, shared ownership leases etc

Right to buy transactions U.K.

1 (1) In the case of a right to buy transaction— U.K.

(a) section 51(1) (contingent consideration to be included in chargeable consideration on assumption that contingency will occur) does not apply, and

(b) any consideration that would be payable only if a contingency were to occur, or that is payable only because a contingency has occurred, does not count as chargeable consideration.

(2) A “right to buy transaction” means—

(a) the sale of a dwelling at a discount, or the grant of a lease of a dwelling at a discount, by a relevant public sector body, or

(b) the sale of a dwelling, or the grant of a lease of a dwelling, in pursuance of the preserved right to buy.

(3) The following are relevant public sector bodies for the purposes of sub-paragraph (2)(a):

Government A Minister of the Crown The Scottish Ministers A Northern Ireland department

Local Government A local housing authority within the meaning of the Housing Act 1985 (c. 68) A county council in England A council constituted under section 2 of the Local Government etc. (Scotland) Act 1994 (c. 39), the common good of such a council or any trust under its control A district council within the meaning of the Local Government Act (Northern Ireland) 1972 (c. 9 (N.I.))

Social housing The Housing Corporation Scottish Homes The Northern Ireland Housing Executive A registered social landlord A housing action trust established under Part 3 of the Housing Act 1988 (c. 50)

New towns and development corporations The Commission for the New Towns A development corporation established by an order made, or having effect as if made, under the New Towns Act 1981 (c. 64) A development corporation established by an order made, or having effect as if made, under the New Towns (Scotland) Act 1968 (c. 16) A new town commission established under section 7 of the New Towns Act (Northern Ireland) 1965 (c. 13 (N.I.)) An urban development corporation established by an order made under section 135 of the Local Government, Planning and Land Act 1980 (c. 65) The Welsh Development Agency

Police A police authority within the meaning of section 101(1) of the Police Act 1996 (c. 16) A police authority within the meaning of section 2(1) or 19(9)(b) of the Police (Scotland) Act 1967 (c. 77) The Northern Ireland Policing Board

Miscellaneous An Education and Libraries Board within the meaning of the Education and Libraries (Northern Ireland) Order 1986 (S.I. 1986/594 (N.I. 3)) The United Kingdom Atomic Energy Authority Any person mentioned in paragraphs (g), (k), (l) or (n) of section 61(11) of the Housing (Scotland) Act 1987 (c. 26) A body prescribed for the purposes of this sub-paragraph by Treasury order.

(4) For the purposes of sub-paragraph (2)(b) the transfer of a dwelling, or the grant of a lease of a dwelling, is made in pursuance of the preserved right to buy if—

(a) the vendor is—

(i) in England and Wales, a person against whom the right to buy under Part 5 of the Housing Act 1985 (c. 68) is exercisable by virtue of section 171A of that Act, or

(ii) in Scotland, a person against whom the right to buy under section 61 of the Housing (Scotland) Act 1987 is exercisable by virtue of section 81A of that Act,

(which provide for the preservation of the right to buy on disposal to a private sector landlord),

(b) the purchaser is the qualifying person for the purposes of the preserved right to buy, and

(c) the dwelling is the qualifying dwelling-house in relation to the purchaser.

(5) A grant under section 20 or 21 of the Housing Act 1996 (c. 52) (purchase grants in respect of disposals at a discount by registered social landlords) does not count as part of the chargeable consideration for a right to buy transaction in relation to which the vendor is a registered social landlord.

Shared ownership lease: election for market value treatment U.K.

2 (1) This paragraph applies where— U.K.

(a) a lease is granted—

(i) by a qualifying body, or

(ii) in pursuance of the preserved right to buy,

(b) the conditions in sub-paragraph (2) are met, and

(c) the purchaser elects for tax to be charged in accordance with this paragraph.

(2) The conditions are as follows—

(a) the lease must be of a dwelling;

(b) the lease must give the lessee or lessees exclusive use of the dwelling;

(c) the lease must provide for the lessee or lessees to acquire the reversion;

(d) the lease must be granted partly in consideration of rent and partly in consideration of a premium calculated by reference to—

(i) the market value of the dwelling, or

(ii) a sum calculated by reference to that value;

(e) the lease must contain a statement of—

(i) the market value of the dwelling, or

(ii) the sum calculated by reference to that value,

by reference to which the premium is calculated.

(3) An election for tax to be charged in accordance with this paragraph must be included in the land transaction return made in respect of the grant of the lease, or in an amendment of that return, and is irrevocable, so that the return may not be amended so as to withdraw the election.

(4) Where this paragraph applies the chargeable consideration for the grant of the lease shall be taken to be the amount stated in the lease in accordance with sub-paragraph (2)(e)(i) or (ii).

As to the tax treatment of the acquisition of the reversion in pursuance of the lease, see paragraph 3.

(5) Section 118 (meaning of “market value”) does not apply in relation to the reference in sub-paragraph (2)(e) above to the market value of the dwelling.

Transfer of reversion under shared ownership lease where election made for market value treatment U.K.

3 U.K. The transfer of the reversion to the lessee or lessees under the terms of a lease to which paragraph 2 applies (shared ownership lease: election for market value treatment) is exempt from charge if—

(a) an election was made for tax to be charged in accordance with that paragraph, and

(b) any tax chargeable in respect of the grant of the lease has been paid.

Shared ownership lease: election where staircasing allowed U.K.

4 (1) This paragraph applies where— U.K.

(a) a lease is granted by a qualifying body or in pursuance of the preserved right to buy,

(b) the conditions in sub-paragraph (2) below are met, and

(c) the purchaser elects for tax to be charged in accordance with this paragraph.

(2) The conditions are as follows—

(a) the lease must be of a dwelling;

(b) the lease must give the lessee or lessees exclusive use of the dwelling;

(c) the lease must provide that the lessee or lessees may, on the payment of a sum, require the terms of the lease to be altered so that the rent payable under it is reduced;

(d) the lease must be granted partly in consideration of rent and partly in consideration of a premium calculated by reference to—

(i) the premium obtainable on the open market for the grant of a lease containing the same terms as the lease but with the substitution of the minimum rent for the rent payable under the lease, or

(ii) a sum calculated by reference to that premium;

(e) the lease must contain a statement of the minimum rent and of—

(i) the premium obtainable on the open market, or

(ii) the sum calculated by reference to that premium,

by reference to which the premium is calculated.

(3) An election for tax to be charged in accordance with this paragraph must be included in the land transaction return made in respect of the grant of the lease, or in an amendment of that return, and is irrevocable, so that the return may not be amended so as to withdraw the election.

(4) Where this paragraph applies—

(a) the rent in consideration of which the lease is granted shall be taken to be the minimum rent stated in the lease in accordance with sub-paragraph (2)(e), and

(b) the chargeable consideration for the grant other than rent shall be taken to be the amount stated in the lease in accordance with sub-paragraph (2)(e)(i) or (ii).

(5) In this paragraph the “minimum rent” means the lowest rent which could become payable under the lease if it were altered as mentioned in sub-paragraph (2)(c) at the date when the lease is granted.

[F1 Shared ownership lease: treatment of staircasing transaction U.K.

Textual Amendments

F1 Sch. 9 para. 4A and cross-heading inserted (with effect in accordance with s. 303(4) of the amending Act) by Finance Act 2004 (c. 12), s. 303(1)

4A (1) This paragraph applies where under a shared ownership lease— U.K.

(a) the lessee or lessees have the right, on the payment of a sum, to require the terms of the lease to be altered so that the rent payable under it is reduced, and

(b) by exercising that right the lessee or lessees acquire an interest, additional to one already held, calculated by reference to the market value of the dwelling and expressed as a percentage of the dwelling or its value (a “share of the dwelling”).

(2) Such an acquisition is exempt from charge if—

(a) an election was made for tax to be charged in accordance with paragraph 2 or, as the case may be, paragraph 4 and any tax chargeable in respect of the grant of the lease has been paid, or

(b) immediately after the acquisition the total share of the dwelling held by the lessee or lessees does not exceed 80%.

(3) In this paragraph “shared ownership lease” means a lease granted—

(a) by a qualifying body, or

(b) in pursuance of the preserved right to buy,

in relation to which the conditions in paragraph 2(2) or 4(2) are met.

(4) Section 118 (meaning of “market value”) does not apply in relation to the references in this paragraph to the market value of the dwelling.]

Shared ownership leases: meaning of “qualifying body” and “preserved right to buy” U.K.

5 (1) This paragraph has effect for the purposes of paragraphs [F2 2, 4 and 4A] (shared ownership leases: election as to basis of taxation). U.K.

(2) A “qualifying body” means—

(a) a local housing authority within the meaning of the Housing Act 1985 (c. 68);

(b) a housing association within the meaning of—

(i) the Housing Associations Act 1985 (c. 69), or

(ii) Part 2 of the Housing (Northern Ireland) Order 1992 (S.I. 1992/1725 (N.I. 15));

(c) a housing action trust established under Part 3 of the Housing Act 1988 (c. 50);

(d) the Northern Ireland Housing Executive;

(e) the Commission for the New Towns;

(f) a development corporation established by an order made, or having effect as if made, under the New Towns Act 1981 (c. 64).

(3) A lease is granted “in pursuance of the preserved right to buy” if—

(a) the vendor is a person against whom the right to buy under Part 5 of the Housing Act 1985 is exercisable by virtue of section 171A of that Act (preservation of right to buy on disposal to private sector landlord),

(b) the lessee is, or lessees are, the qualifying person for the purposes of the preserved right to buy, and

(c) the lease is of a dwelling that is the qualifying dwelling-house in relation to the purchaser.

Textual Amendments

F2 Words in Sch. 9 para. 5(1) substituted (with effect in accordance with s. 303(4) of the amending Act) by Finance Act 2004 (c. 12), s. 303(2)

Rent to mortgage or rent to loan: chargeable consideration U.K.

6 (1) The chargeable consideration for a rent to mortgage or rent to loan transaction is determined in accordance with this paragraph. U.K.

(2) A “rent to mortgage transaction” means—

(a) the transfer of a dwelling to a person, or

(b) the grant of a lease of a dwelling to a person,

pursuant to the exercise by that person of the right to acquire on rent to mortgage terms under Part 5 of the Housing Act 1985 (c. 68).

(3) The chargeable consideration for such a transaction is equal to the price that, by virtue of section 126 of the Housing Act 1985, would be payable for—

(a) a transfer of the dwelling to the person (where the rent to mortgage transaction is a transfer), or

(b) the grant of a lease of the dwelling to the person (where the rent to mortgage transaction is the grant of a lease),

if the person were exercising the right to buy under Part 5 of that Act.

(4) A “rent to loan transaction” means the execution of a heritable disposition in favour of a person pursuant to the exercise by that person of the right to purchase a house by way of the rent to loan scheme in Part 3 of the Housing (Scotland) Act 1987 (c. 26).

(5) The chargeable consideration for such a transaction is equal to the price that, by virtue of section 62 of the Housing (Scotland) Act 1987, would be payable for the house if the person were exercising the right to purchase under section 61 of that Act.