Finance Act 2003 (c. 14)

(The document as of February, 2008)

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Section 56

SCHEDULE 5 Stamp duty land tax: amount of tax chargeable: rent

Introduction

1 This Schedule provides for calculating the tax chargeable--

(a) in respect of a chargeable transaction for which the chargeable consideration consists of or includes rent, or

(b) where such a transaction is to be taken into account as a linked transaction.

Calculation of tax chargeable in respect of rent

2 (1) Tax is chargeable under this Schedule in respect of so much of the chargeable consideration as consists of rent.

(2) The tax so chargeable is a percentage of the net present value of the rent payable over the term of the lease.

(3) That percentage is determined by reference to whether the relevant land--

(a) consists entirely of residential property (in which case Table A below applies), or

(b) consists of or includes land that is not residential property (in which case Table B below applies),

and, in either case, by reference to the amount of the relevant rental value.

Table A: Residential

Relevant rental value	Percentage
Not more than £60,000	0%
More than £60,000	1%

Table B: Non-residential or mixed

Relevant rental value	Percentage
Not more than £150,000	0%
More than £150,000	1%

(4) For the purposes of sub-paragraph (3)--

(a) the relevant land is the land that is the subject of the lease, and

(b) the relevant rental value is the net present value of the rent payable over the term of the lease,

subject as follows.

(5) If the lease in question is one of a number of linked transactions for which the chargeable consideration consists of or includes rent--

(a) the relevant land is any land that is the subject of any of those leases, and

(b) the relevant rental value is the total of the net present values of the rent payable over the terms of those leases.

Net present value of rent payable over term of lease

3 The net present value (v) of the rent payable over the term of a lease is calculated by applying the formula:

---

where--
- ri is the rent payable (see paragraphs 4 and 5) in year i,
- i is the first, second, third, etc year of the term,
- n is the term of the lease (see paragraphs 6 and 7), and
- T is the temporal discount rate (see paragraph 8).

Rent payable

4 (1) For the purposes of this Schedule a single sum expressed to be payable in respect of rent, or expressed to be payable in respect of rent and other matters but not apportioned, shall be treated as entirely rent.

This is without prejudice to the application of paragraph 4 of Schedule 4 (chargeable consideration: just and reasonable apportionment) where separate sums are expressed to be payable in respect of rent and other matters.

(2) Subject to paragraph 5 (effect of provision for rent review), section 51 (contingent, uncertain or unascertained consideration) applies in relation to rent as in relation to other chargeable consideration, but no application may be made under section 90 (application to defer payment in case of contingent or uncertain consideration) in respect of tax chargeable under this Schedule.

(3) No account shall be taken for the purposes of this Schedule of any provision for rent to be adjusted in line with the retail price index.

Effect of provision for rent review

5 (1) This paragraph applies where the lease contains provision for adjustment of the rent, as from a specified date or dates, to reflect current market values.

(2) In this paragraph--

(a) a "rent review" means an adjustment in pursuance of such provision, and

(b) references to the date of a rent review are to the date from which any such adjustment has or would have effect.

(3) If the lease provides for a rent review on or before the end of the second year of the lease, section 51 (contingent, uncertain or unascertained consideration) applies in relation to the possibility that the rent may be adjusted on that review.

(4) If the lease provides for a rent review after the end of the second year of the lease, the annual rent payable after that review--

(a) is determined without regard to the possibility of an adjustment on that review, and

(b) is assumed to be the same as the annual rent payable over the year preceding the first rent review or, if the period from the beginning of the term of the lease to the date of the first rent review is less than a year, over that period.

Term of lease

6 (1) For the purposes of this Schedule the term of a lease is determined as follows.

(2) Subject to the following provisions of this paragraph, the term of a lease is--

(a) the contractual term specified in the lease, or

(b) if shorter, the period from the date of the grant of the lease until the end of the contractual term.

(3) Where in England and Wales or Northern Ireland--

(a) an agreement for a lease is entered into,

(b) the agreement is substantially performed otherwise than by completion, and

the term of a lease is the period from the date of substantial performance of the agreement until the end of the contractual term specified in the lease.

In this sub-paragraph "substantially performed" and "completion" have the same meanings as in section 44 (contract and conveyance).

(4) Notwithstanding anything in sub-paragraph (2) or (3), a lease granted by way of renewal of a previous lease is treated as if its term had begun on the expiry of the previous lease.

This applies, in particular, to leases granted under Part 2 of the Landlord and Tenant Act 1954 (c. 56) or under the Business Tenancies (Northern Ireland) Order 1996 (S.I. 1996/725 (N.I. 5)).

(5) No account shall be taken of any right of either party to determine the lease or to renew it.

Treatment of lease for indefinite term

7 (1) For the purposes of this Schedule a lease for an indefinite term is treated as if it were a lease for a term of 12 years.

(2) Sub-paragraph (1) applies, in particular, to a lease expressed to be--

(a) perpetual,

(b) for life, or

(3) No account shall be taken for the purposes of this Schedule of any statutory provision deeming such a lease to be a lease for a longer definite term.

Temporal discount rate

8 (1) For the purposes of this Schedule the "temporal discount rate" is 3.5% or such other rate as may be specified by regulations made by the Treasury.

(2) Regulations under this paragraph may make any such provision as is mentioned in subsection (3)(b) to (f) of section 178 of the Finance Act 1989 (c. 26) (power of Treasury to set rates of interest).

(3) Subsection (5) of that section (power of Inland Revenue to specify rate by order in certain circumstances) applies in relation to regulations under this paragraph as it applies in relation to regulations under that section.

Tax chargeable in respect of consideration other than rent

9 (1) Where in the case of a transaction to which this Schedule applies there is chargeable consideration other than rent, the provisions of this Part apply in relation to that consideration as in relation to other chargeable consideration.

(2) If the annual rent exceeds £600 a year, the 0% band in the Tables in subsection (2) of section 55 does not apply and any case that would have fallen within that band is treated as falling within the 1% band.

(3) For the purposes of sub-paragraph (2) the "annual rent" means the average annual rent over the term of the lease or, if--

(a) different amounts of rent are payable for different parts of the term, and

(b) those amounts (or any of them) are ascertainable at the effective date of the transaction,

the average annual rent over the period for which the highest ascertainable rent is payable.

(4) Tax chargeable under this Schedule is in addition to any tax chargeable under section 55 in respect of consideration other than rent.

(5) Where a transaction to which this Schedule applies falls to be taken into account for the purposes of that section as a linked transaction, no account shall be taken of rent in determining the relevant consideration.

Increase of rent treated as grant of new lease

10 (1) Where a lease is varied so as to increase the amount of the rent, the variation is treated for the purposes of this Schedule as if it were the grant of a lease in consideration of the additional rent made payable by it.

(2) Sub-paragraph (1) does not apply to an increase of rent in pursuance of a provision already contained in the lease.

Interpretation

11 In Scotland any reference in this Part to the term of a lease is to the period of the lease.

Section 57

SCHEDULE 6 Stamp duty land tax: disadvantaged areas relief

Part 1 Disadvantaged areas

Meaning of "disadvantaged area"

1 (1) For the purposes of this Schedule a "disadvantaged area" means an area designated as a disadvantaged area by regulations made by the Treasury.

(2) The regulations may--

(a) designate specified areas as disadvantaged areas, or

(b) provide for areas of a description specified in the regulations to be designated as disadvantaged areas.

(3) If the regulations so provide, the designation of an area as a disadvantaged area shall have effect for such period as may be specified by or determined in accordance with the regulations.

(4) The regulations may--

(a) make different provision for different cases, and

(b) contain such incidental, supplementary, consequential or transitional provision as appears to the Treasury to be necessary or expedient.

Continuation of regulations made for purposes of stamp duty

2 Any regulations made by the Treasury--

(a) designating areas as disadvantaged areas for the purposes of section 92 of the Finance Act 2001 (c. 9) (stamp duty exemption for land in disadvantaged areas), and

(b) in force immediately before the implementation date,

have effect for the purposes of this Schedule as if made under paragraph 1 above and may be varied or revoked accordingly.

Part 2 Land wholly situated in a disadvantaged area

Introduction

3 This Part of this Schedule applies to a land transaction if the subject matter of the transaction is a chargeable interest in relation to land that is wholly situated in a disadvantaged area.

Land all non-residential

4 If all the land is non-residential property, the transaction is exempt from charge.

Land all residential

5 (1) This paragraph applies where all the land is residential property.

(2) If--

(a) the consideration for the transaction does not include rent and the relevant consideration does not exceed £150,000, or

(b) the consideration for the transaction consists only of rent and the relevant rental value does not exceed £150,000,

the transaction is exempt from charge.

(3) If the consideration for the transaction includes rent and the relevant rental value does not exceed £150,000, the rent does not count as chargeable consideration.

(4) If the consideration for the transaction includes consideration other than rent, then--

(a) if--

(i) the annual rent does not exceed £600, and

(ii) the relevant consideration does not exceed £150,000,

the consideration other than rent does not count as chargeable consideration;

(b) if the annual rent exceeds £600, the 0% band in Table A in subsection (2) of section 55 does not apply in relation to the consideration other than rent and any case that would have fallen within that band is treated as falling within the 1% band.

Land partly non-residential and partly residential

6 (1) This paragraph applies where the land is partly non-residential property and partly residential property.

References in this paragraph to the consideration attributable to land that is non-residential property or land that is residential property (or to the rent or annual rent so attributable) are to the consideration (or rent or annual rent) so attributable on a just and reasonable apportionment.

(2) The consideration attributable to land that is non-residential property does not count as chargeable consideration.

(3) The following provisions apply in relation to the consideration attributable to land that is residential property.

(4) If--

(a) the consideration so attributable does not include rent and the relevant consideration does not exceed £150,000, or

(b) the consideration so attributable consists only of rent and the relevant rental value does not exceed £150,000,

none of the consideration so attributable counts as chargeable consideration.

(5) If the consideration so attributable includes rent and the relevant rental value does not exceed £150,000, the rent so attributable does not count as chargeable consideration.

(6) If the consideration so attributable includes consideration other than rent, then--

(a) if--

(i) the annual rent so attributable does not exceed £600, and

(ii) the relevant consideration does not exceed £150,000,

the consideration other than rent does not count as chargeable consideration;

(b) if the annual rent so attributable exceeds £600, the 0% band in the Tables in subsection (2) of section 55 does not apply in relation to the consideration other than rent and any case that would have fallen within that band is treated as falling within the 1% band.

Part 3 Land partly situated in a disadvantaged area

Introduction

7 (1) This Part of this Schedule applies to a land transaction if the subject matter of the transaction is a chargeable interest in relation to land that is partly in a disadvantaged area and partly outside such an area.

(2) References in this Part to the consideration attributable to land situated in a disadvantaged area and to land not so situated (or to the rent or annual rent so attributable) are to the consideration (or rent or annual rent) so attributable on a just and reasonable apportionment.

Land all non-residential

8 If all of the land situated in a disadvantaged area is non-residential property, the consideration attributable to the land situated in the disadvantaged area does not count as chargeable consideration.

Land all residential

9 (1) This paragraph applies where all the land situated in a disadvantaged area is residential property.

(2) If--

(a) the consideration attributable to land situated in a disadvantaged area does not include rent and the relevant consideration does not exceed £150,000, or

(b) the consideration so attributable consists only of rent and the relevant rental value does not exceed £150,000,

none of the consideration so attributable counts as chargeable consideration.

(3) If the consideration attributable to land situated in a disadvantaged area includes rent and the relevant rental value does not exceed £150,000, the rent so attributable does not count as chargeable consideration.

(4) If the consideration attributable to land in a disadvantaged area includes consideration other than rent ("non-rent consideration"), then--

(a) if--

(i) the annual rent so attributable does not exceed £600, and

(ii) the relevant consideration does not exceed £150,000,

the non-rent consideration so attributable does not count as chargeable consideration;

(b) if the annual rent so attributable exceeds £600, the 0% band in Table A in subsection (2) of section 55 does not apply in relation to the non-rent consideration so attributable and any case that would have fallen within that band is treated as falling within the 1% band.

Land partly non-residential and partly residential

10 (1) This paragraph applies where the land situated in a disadvantaged area is partly non-residential property and partly residential property.

References in this paragraph to the consideration attributable to land that is non-residential property or land that is residential property (or to the rent or annual rent so attributable) are to the consideration (or rent or annual rent) attributable to land in a disadvantaged area that is, on a just and reasonable apportionment, so attributable.

(2) The consideration attributable to land that is non-residential property does not count as chargeable consideration.

(3) The following provisions apply in relation to the consideration attributable to land that is residential property.

(4) If--

(a) the consideration so attributable does not include rent and the relevant consideration does not exceed £150,000, or

(b) the consideration so attributable consists only of rent and the relevant rental value does not exceed £150,000,

none of the consideration so attributable counts as chargeable consideration.

(5) If the consideration so attributable includes rent and the relevant rental value does not exceed £150,000, the rent so attributable does not count as chargeable consideration.

(6) If the consideration so attributable includes consideration other than rent, then--

(a) if--

(i) the annual rent so attributable does not exceed £600, and

(ii) the relevant consideration does not exceed £150,000,

the consideration other than rent does not count as chargeable consideration;

Part 4 Interpretation

Relevant consideration and relevant rental value

11 (1) References in this Schedule to the "relevant consideration" in relation to a transaction are to the amount falling to be taken into account for the purposes of section 55(2) in determining the rate of tax chargeable under that section in relation to the transaction apart from any relief under this Schedule (whether in relation to that or any other transaction).

(2) References in this Schedule to the "relevant rental value" in relation to a transaction are to the amount falling to be taken into account for the purposes of paragraph 2(3) of Schedule 5 in determining the rate of tax chargeable under that Schedule in relation to the transaction apart from any relief under this Schedule (whether in relation to that or any other transaction).

Rent and annual rent

12 For the purposes of this Schedule "rent" has the same meaning as in Schedule 5 (amount of tax chargeable: rent) and "annual rent" has the same meaning as in paragraph 9(2) of that Schedule.

Section 62

SCHEDULE 7 Stamp duty land tax: group relief and reconstruction and acquisition reliefs

Part 1 Group relief

Group relief

1 (1) A transaction is exempt from charge if the vendor and purchaser are companies that at the effective date of the transaction are members of the same group.

(2) For the purposes of group relief--

(a) "company" means a body corporate, and

(b) companies are members of the same group if one is the 75% subsidiary of the other or both are 75% subsidiaries of a third company.

(3) For the purposes of group relief a company ("company A") is the 75% subsidiary of another company ("company B") if company B--

(a) is beneficial owner of not less than 75% of the ordinary share capital of company A,

(b) is beneficially entitled to not less than 75% of any profits available for distribution to equity holders of company A, and

(c) would be beneficially entitled to not less than 75% of any assets of company A available for distribution to its equity holders on a winding-up.

(4) The ownership referred to in sub-paragraph (3)(a) is ownership either directly or through another company or companies.

For the purposes of that provision the amount of ordinary share capital of company A owned by company B through another company or companies shall be determined in accordance with section 838(5) to (10) of the Taxes Act 1988.

(5) In sub-paragraphs (3)(a) and (4) above "ordinary share capital", in relation to a company, means all the issued share capital (by whatever name called) of the company, other than capital the holders of which have a right to a dividend at a fixed rate but have no other right to share in the profits of the company.

(6) Schedule 18 to the Taxes Act 1988 (equity holders and profits or assets available for distribution) applies for the purposes of subsection (3)(b) and (c) above as it applies for the purposes of section 413(7)(a) and (b) of that Act, but with the omission of paragraphs 5(3) and 5B to 5E.

(7) This paragraph is subject to paragraph 2 (restrictions on availability of group relief) and paragraph 3 (withdrawal of group relief).

Restrictions on availability of group relief

2 (1) Group relief is not available if at the effective date of the transaction there are arrangements in existence by virtue of which, at that or some later time, a person has or could obtain, or any persons together have or could obtain, control of the purchaser but not of the vendor.

This does not apply to arrangements entered into with a view to an acquisition of shares by a company ("the acquiring company")--

(a) in relation to which section 75 of the Finance Act 1986 (c. 41) (stamp duty: acquisition relief) will apply,

(b) in relation to which the conditions for relief under that section will be met, and

(2) Group relief is not available if the transaction is effected in pursuance of, or in connection with, arrangements under which--

(a) the consideration, or any part of the consideration, for the transaction is to be provided or received (directly or indirectly) by a person other than a group company, or

(b) the vendor and the purchaser are to cease to be members of the same group by reason of the purchaser ceasing to be a 75% subsidiary of the vendor or a third company.

(3) Arrangements are within sub-paragraph (2)(a) if under them the vendor or the purchaser, or another group company, is to be enabled to provide any of the consideration, or is to part with any of it, by or in consequence of the carrying out of a transaction or transactions involving, or any of them involving, a payment or other disposition by a person other than a group company.

(4) In sub-paragraphs (2)(a) and (3) a "group company" means a company that at the effective date of the transaction is a member of the same group as the vendor or the purchaser.

(5) In this paragraph--

"arrangements" includes any scheme, agreement or understanding, whether or not legally enforceable; and
"control" has the meaning given by section 840 of the Taxes Act 1988.

Withdrawal of group relief

3 (1) Where in the case of a transaction ("the relevant transaction") that is exempt from charge by virtue of paragraph 1 (group relief)--

(a) the purchaser ceases to be a member of the same group as the vendor--

(i) before the end of the period of three years beginning with the effective date of the transaction, or

(ii) in pursuance of, or in connection with, arrangements made before the end of that period,

and

(b) at the time the purchaser ceases to be a member of the same group as the vendor ("the relevant time"), it or a relevant associated company holds a chargeable interest--

(i) that was acquired by the purchaser under the relevant transaction, or

(ii) that is derived from a chargeable interest so acquired,

and that has not subsequently been acquired at market value under a chargeable transaction for which group relief was available but was not claimed,

group relief in relation to the relevant transaction, or an appropriate proportion of it, is withdrawn and tax is chargeable in accordance with this paragraph.

(2) The amount chargeable is the tax that would have been chargeable in respect of the relevant transaction but for group relief if the chargeable consideration for that transaction had been an amount equal to the market value of the subject matter of the transaction or, as the case may be, an appropriate proportion of the tax that would have been so chargeable.

(3) In sub-paragraphs (1) and (2) "an appropriate proportion" means an appropriate proportion having regard to the subject matter of the relevant transaction and what is held at the relevant time by the transferee company or, as the case may be, by that company and its relevant associated companies.

(4) In this paragraph--

"arrangements" includes any scheme, agreement or understanding, whether or not legally enforceable; and
"relevant associated company", in relation to the purchaser, means a company that--
(a)
is a member of the same group as the purchaser immediately before the purchaser ceases to be a member of the same group as the vendor, and
(b)
ceases to be a member of the same group as the vendor in consequence of the purchaser so ceasing.

(5) This paragraph has effect subject to paragraph 4 (cases in which group relief not withdrawn).

Cases in which group relief not withdrawn

4 (1) Group relief is not withdrawn under paragraph 3 in the following cases.

(2) The first case is where the purchaser ceases to be a member of the same group as the vendor because the vendor leaves the group.

(3) The vendor is regarded as leaving the group if the companies cease to be members of the same group by reason of a transaction relating to shares in--

(a) the vendor, or

(b) another company that as a result of the transaction ceases to be a member of the same group as the purchaser.

(4) The second case is where the purchaser ceases to be a member of the same group as the vendor by reason of anything done for the purposes of, or in the course of, winding up the vendor or another company that is above the vendor in the group structure.

(5) For this purpose a company is "above" the vendor in the group structure if the vendor, or another company that is above the vendor in the group structure, is a 75% subsidiary of the company.

(6) The third case is where--

(a) the purchaser ceases to be a member of the same group as the vendor as a result of an acquisition of shares by another company ("the acquiring company") in relation to which--

(i) section 75 of the Finance Act 1986 (c. 41) applies (stamp duty: acquisition relief), and

(ii) the conditions for relief under that section are met,

and

(b) the purchaser is immediately after that acquisition a member of the same group as the acquiring company.

(7) But if in a case within sub-paragraph (6)--

(a) the purchaser ceases to be a member of the same group as the acquiring company--

(i) before the end of the period of three years beginning with the effective date of the relevant transaction, or

(ii) in pursuance of, or in connection with, arrangements made before the end of that period,

and

(b) at the time the purchaser ceases to be a member of the same group as the acquiring company, it or a relevant associated company holds a chargeable interest--

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