Finance Act 2003 (c. 14)

(The document as of February, 2008)

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(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--

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

(ii) that is derived from an 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,

the provisions of this Part relating to group relief apply as if the purchaser had then ceased to be a member of the same group as the vendor.

(8) In sub-paragraph (7)--

"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 is a member of the same group as the purchaser that ceases to be a member of the same group as the acquiring company in consequence of the purchaser so ceasing.

Recovery of group relief from another group company or controlling director

5 (1) This paragraph applies where--

(a) tax is chargeable under paragraph 3 (withdrawal of group relief),

(b) the amount so chargeable has been finally determined, and

(2) The following persons may, by notice under paragraph 6, be required to pay the unpaid tax--

(a) the vendor;

(b) any company that at any relevant time was a member of the same group as the purchaser and was above it in the group structure;

(c) any person who at any relevant time was a controlling director of the purchaser or a company having control of the purchaser.

(3) For the purposes of sub-paragraph (2)(b)--

(a) a "relevant time" means any time between the effective date of the relevant transaction and the purchaser ceasing to be a member of the same group as the vendor; and

(b) a company ("company A") is "above" another company ("company B") in a group structure if company B, or another company that is above company B in the group structure, is a 75% subsidiary of company A.

(4) In sub-paragraph (2)(c)--

"director", in relation to a company, has the meaning given by section 67(1) of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (read with subsection (2) of that section) and includes any person falling within section 417(5) of the Taxes Act 1988 (read with subsection (6) of that section); and
"controlling director", in relation to a company, means a director of the company who has control of it (construing control in accordance with section 416 of the Taxes Act 1988).

Recovery of group relief: supplementary

6 (1) The Inland Revenue may serve a notice on a person within paragraph 5(2) above requiring him within 30 days of the service of the notice to pay the amount that remains unpaid.

(2) Any such notice must be served before the end of the period of three years beginning with the date of the final determination mentioned in paragraph 5(1)(b).

(3) The notice must state the amount required to be paid by the person on whom the notice is served.

(4) The notice has effect--

(a) for the purposes of the recovery from that person of the amount required to be paid and of interest on that amount, and

(b) for the purposes of appeals,

as if it were a notice of assessment and that amount were an amount of tax due from that person.

(5) A person who has paid an amount in pursuance of a notice under this paragraph may recover that amount from the purchaser.

(6) A payment in pursuance of a notice under this paragraph is not allowed as a deduction in computing any income, profits or losses for any tax purpose.

Part 2 Reconstruction and acquisition reliefs

Reconstruction relief

7 (1) Where--

(a) a company ("the acquiring company") acquires the whole or part of the undertaking of another company ("the target company") in pursuance of a scheme for the reconstruction of the target company, and

(b) the first, second and third conditions specified below are met,

a land transaction entered into for the purposes of or in connection with the transfer of the undertaking or part is exempt from charge.

Relief under this paragraph is referred to in this Part as "reconstruction relief".

(2) The first condition is that the consideration for the acquisition consists wholly or partly of the issue of non-redeemable shares in the acquiring company to all the shareholders of the target company.

"Non-redeemable shares" means shares that are not redeemable shares.

(3) Where the consideration for the acquisition consists partly of the issue of non-redeemable shares as mentioned in the first condition, that condition is met only if the rest of the consideration consists wholly of the assumption or discharge by the acquiring company of liabilities of the target company.

(4) The second condition is that after the acquisition has been made--

(a) each shareholder of each of the companies is a shareholder of the other, and

(b) the proportion of shares of one of the companies held by any shareholder is the same, or as nearly as may be the same, as the proportion of shares of the other company held by that shareholder.

(5) The third condition is that the acquisition is effected for bona fide commercial reasons and does not form part of a scheme or arrangement of which the main purpose, or one of the main purposes, is the avoidance of liability to tax.

"Tax" here means stamp duty, income tax, corporation tax, capital gains tax or tax under this Part.

(6) This paragraph is subject to paragraph 9 (withdrawal of reconstruction or acquisition relief).

Acquisition relief

8 (1) Where--

(a) a company ("the acquiring company") acquires the whole or part of the undertaking of another company ("the target company"), and

(b) the first and second conditions specified below are met,

the rate of tax chargeable on a land transaction entered into for the purposes of or in connection with the transfer of the undertaking or part is limited to 0.5%.

Relief under this paragraph is referred to in this Part as "acquisition relief".

(2) The first condition is that the consideration for the acquisition consists wholly or partly of the issue of non-redeemable shares in the acquiring company to--

(a) the target company, or

(b) all or any of the target company's shareholders.

"Non-redeemable shares" means shares that are not redeemable shares.

(a) cash not exceeding 10% of the nominal value of the non-redeemable shares so issued, or

(b) the assumption or discharge by the acquiring company of liabilities of the target company, or

(4) The second condition is that the acquiring company is not associated with another company that is a party to arrangements with the target company relating to shares of the acquiring company issued in connection with the transfer of the undertaking or part.

(5) For this purpose--

(a) companies are associated if one has control of the other or both are controlled by the same person or persons, and

(b) "arrangements" includes any scheme, agreement or understanding, whether or not legally enforceable.

The reference in paragraph (a) to control shall be construed in accordance with section 416 of the Taxes Act 1988.

(6) This paragraph is subject to paragraph 9 (withdrawal of reconstruction or acquisition relief).

Withdrawal of reconstruction or acquisition relief

9 (1) Where in the case of a transaction ("the relevant transaction") that is exempt by virtue of reconstruction relief or is subject to a reduced rate of tax by virtue of acquisition relief--

(a) control of the acquiring company changes--

(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 control of the acquiring company changes ("the relevant time"), it or a relevant associated company holds a chargeable interest--

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

(ii) that is derived from an interest so acquired,

and that has not subsequently been acquired at market value under a chargeable transaction in relation to which reconstruction or acquisition relief was available but was not claimed,

reconstruction or acquisition 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 reconstruction or acquisition 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 acquiring company or, as the case may be, by that company and any relevant associated companies.

(4) In this paragraph "relevant associated company", in relation to the acquiring company, means a company--

(a) that is controlled by the acquiring company immediately before the control of that company changes, and

(b) of which control changes in consequence of the change of control of that company.

(5) In this paragraph--

(a) "arrangements" includes any scheme, agreement or understanding, whether or not legally enforceable;

(b) "control" shall be construed in accordance with section 416 of the Taxes Act 1988; and

(i) by a different person,

(ii) by a different number of persons, or

(iii) by two or more persons at least one of whom is not the person, or one of the persons, by whom the company was previously controlled.

(6) This paragraph has effect subject to paragraph 10 (cases in which reconstruction or acquisition relief not withdrawn).

Cases in which reconstruction or acquisition relief not withdrawn

10 (1) Reconstruction or acquisition relief is not withdrawn under paragraph 9 in the following cases.

(2) The first case is where control of the acquiring company changes as a result of a share transaction that is effected as mentioned in any of paragraphs (a) to (d) of paragraph 3 of Schedule 3 (transactions in connection with divorce etc).

(3) The second case is where control of the acquiring company changes as a result of a share transaction that--

(a) is effected as mentioned in paragraph 4(1) of Schedule 3, and

(b) meets the conditions in paragraph 4(2) of that Schedule (variation of testamentary dispositions etc).

(4) The third case is where control of the acquiring company changes as a result of an exempt intra-group transfer.

An "exempt intra-group transfer" means a transfer of shares effected by an instrument that is exempt from stamp duty by virtue of section 42 of the Finance Act 1930 (c. 28) or section 11 of the Finance Act (Northern Ireland) 1954 (c. 23 (N. I.)) (transfers between associated bodies corporate).

But see paragraph 11 (withdrawal of relief in case of subsequent non-exempt transfer).

(5) The fourth case is where control of the acquiring company changes as a result of a transfer of shares to another company in relation to which share acquisition relief applies.

"Share acquisition relief" means relief under section 77 of the Finance Act 1986 (c. 41) and a transfer is one in relation to which that relief applies if an instrument effecting the transfer is exempt from stamp duty by virtue of that provision.

But see paragraph 11 (withdrawal in case of subsequent non-exempt transfer).

(6) The fifth case is where--

(a) control of the acquiring company changes as a result of a loan creditor becoming, or ceasing to be, treated as having control of the company, and

(b) the other persons who were previously treated as controlling the company continue to be so treated.

"Loan creditor" here has the meaning given by section 417(7) to (9) of the Taxes Act 1988.

Withdrawal of reconstruction or acquisition relief on subsequent non-exempt transfer

11 (1) Where paragraph 10(4) (change of control of acquiring company as a result of exempt intra-group transfer) has effect to prevent the withdrawal of reconstruction or acquisition relief on a change of control of the acquiring company, but--

(a) a company holding shares in the acquiring company to which the exempt intra-group transfer related, or that are derived from shares to which that transfer related, ceases to be a member of the same group as the target 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) the acquiring company or a relevant associated company, at that time ("the relevant time"), holds a chargeable interest--

(i) that was transferred to the acquiring company by the relevant transaction, or

(ii) that is derived from an interest that was so transferred,

and that has not subsequently been transferred at market value by a chargeable transaction in relation to which reconstruction or acquisition relief was available but was not claimed,

reconstruction or acquisition 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) Where paragraph 10(5) (change of control of acquiring company as a result of a transfer to which share acquisition relief applies) has effect to prevent the withdrawal of reconstruction or acquisition relief on a change of control of the acquiring company, but--

(a) control of the other company mentioned in that provision changes--

(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,

at a time when that company holds any shares transferred to it by the exempt transfer, or any shares derived from shares so transferred,

and

(b) the acquiring company or a relevant associated company, at that time ("the relevant time"), holds a chargeable interest--

(i) that was transferred to the acquiring company by the relevant transaction, or

(ii) that is derived from an interest that was so transferred,

and that has not subsequently been transferred at market value by a chargeable transaction in relation to which reconstruction or acquisition relief was available but was not claimed,

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

(3) The amount chargeable is the tax that would have been chargeable in respect of the relevant transaction but for reconstruction or acquisition 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.

(4) In sub-paragraphs (1), (2) and (3) "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 acquiring company or, as the case may be, by that company and any relevant associated companies.

(5) In this paragraph "relevant associated company", in relation to the acquiring company, means a company--

(a) that is controlled by the acquiring company immediately before the control of that company changes, and

(b) of which control changes in consequence of the change of control of that company.

(6) In this paragraph--

(a) "arrangements" includes any scheme, agreement or understanding, whether or not legally enforceable;

(b) "control" shall be construed in accordance with section 416 of the Taxes Act 1988; and

(i) by a different person,

(ii) by a different number of persons, or

(iii) by two or more persons at least one of whom is not the person, or one of the persons, by whom the company was previously controlled.

Recovery of reconstruction or acquisition relief from another group company or controlling director

12 (1) This paragraph applies where--

(a) tax is chargeable under paragraph 9 or 11 (withdrawal of reconstruction or acquisition relief),

(b) the amount so chargeable has been finally determined, and

(2) The following persons may, by notice under paragraph 13, be required to pay the unpaid tax--

(a) any company that at any relevant time was a member of the same group as the acquiring company and was above it in the group structure;

(b) any person who at any relevant time was a controlling director of the acquiring company or a company having control of the acquiring company.

(3) For the purposes of sub-paragraph (2) "relevant time" means any time between effective date of the relevant transaction and the change of control by virtue of which tax is chargeable.

(4) For the purposes of sub-paragraph (2)(a) a company ("company A") is "above" another company ("company B") in a group structure if company B, or another company that is above company B in the group structure, is a 75% subsidiary of company A.

(5) For the purposes of sub-paragraph (2)(b)--

(a) "director", in relation to a company, has the meaning given by section 67(1) of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (read with subsection (2) of that section) and includes any person falling within section 417(5) of the Taxes Act 1988 (read with subsection (6) of that section); and

(b) "controlling director", in relation to a company, means a director of the company who has control of it (construing control in accordance with section 416 of the Taxes Act 1988).

Recovery of reconstruction or acquisition relief: supplementary

13 (1) The Inland Revenue may serve a notice on a person within paragraph 12(2) above requiring him within 30 days of the service of the notice to pay the amount that remains unpaid.

(2) Any such notice must be served before the end of the period of three years beginning with the date of the final determination mentioned in paragraph 12(1)(b).

(3) The notice must state the amount required to be paid by the person on whom the notice is served.

(4) The notice has effect--

(a) for the purposes of the recovery from that person of the amount required to be paid and of interest on that amount, and

(b) for the purposes of appeals,

as if it were a notice of assessment and that amount were an amount of tax due from that person.

(5) A person who has paid an amount in pursuance of a notice under this paragraph may recover that amount from the acquiring company.

(6) A payment in pursuance of a notice under this paragraph is not allowed as a deduction in computing any income, profits or losses for any tax purpose.

Section 68

SCHEDULE 8 Stamp duty land tax: charities relief

Charities relief

1 (1) A land transaction is exempt from charge if the purchaser is a charity and the following conditions are met.

Relief under this paragraph is referred to in this Part as "charities relief".

(2) The first condition is that the purchaser must intend to hold the subject-matter of the transaction for qualifying charitable purposes, that is--

(a) for use in furtherance of the charitable purposes of the purchaser or of another charity, or

(b) as an investment from which the profits are applied to the charitable purposes of the purchaser.

(3) The second condition is that the transaction must not have not been entered into for the purpose of avoiding tax under this Part (whether by the purchaser or any other person).

(4) In this paragraph a "charity" means a body or trust established for charitable purposes only.

Withdrawal of charities relief

2 (1) Where in the case of a transaction ("the relevant transaction") that is exempt by virtue of paragraph 1 (charities relief)--

(a) a disqualifying event occurs--

(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 of the disqualifying event the purchaser holds a chargeable interest--

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

(ii) that is derived from an interest so acquired,

charities 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 amount that would have been chargeable in respect of the relevant transaction but for charities relief or, as the case may be, an appropriate proportion of the tax that would have been so chargeable.

(3) For the purposes of this paragraph a "disqualifying event" means--

(a) the purchaser ceasing to be established for charitable purposes only, or

(b) the subject-matter of the transaction, or any interest or right derived from it, being used or held by the purchaser otherwise than for qualifying charitable purposes.

(4) In sub-paragraphs (1) and (2) an "appropriate proportion" means an appropriate proportion having regard to--

(a) what was acquired by the purchaser under the relevant transaction and what is held by the purchaser at the time of the disqualifying event, and

(b) the extent to which what is held by the purchaser at that time becomes used or held for purposes other than qualifying charitable purposes.

(5) In this paragraph "qualifying charitable purposes" has the same meaning as in paragraph 1.

Section 70

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

Right to buy transactions

1 (1) In the case of a right to buy transaction--

(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

(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

2 (1) This paragraph applies where--

(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

(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;

(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

3 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

4 (1) This paragraph applies where--

(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

(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

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