Finance Act 2003 (c. 14)

(The document as of February, 2008)

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(3) The tax is under the care and management of the Commissioners of Inland Revenue (referred to in this Part as "the Board").

Land transactions

43 Land transactions

(1) In this Part a "land transaction" means any acquisition of a chargeable interest.

As to the meaning of "chargeable interest" see section 48.

(2) Except as otherwise provided, this Part applies however the acquisition is effected, whether by act of the parties, by order of a court or other authority, by or under any statutory provision or by operation of law.

(3) For the purposes of this Part--

(a) the creation of a chargeable interest is--

(i) an acquisition by the person becoming entitled to the interest created, and

(ii) a disposal by the person whose interest or right is subject to the interest created;

(b) the surrender or release of a chargeable interest is--

(i) an acquisition of that interest by any person whose interest or right is benefitted or enlarged by the transaction, and

(ii) a disposal by the person ceasing to be entitled to that interest; and

(i) an acquisition of a chargeable interest by the person benefitting from the variation, and

(ii) a disposal of a chargeable interest by the person whose interest is subject to or limited by the variation.

(4) References in this Part to the "purchaser" and "vendor", in relation to a land transaction, are to the person acquiring and the person disposing of the subject-matter of the transaction.

These expressions apply even if there is no consideration given for the transaction.

(5) A person is not treated as a purchaser unless he has given consideration for, or is a party to, the transaction.

(6) References in this Part to the subject-matter of a land transaction are to the chargeable interest acquired (the "main subject-matter"), together with any interest or right appurtenant or pertaining to it that is acquired with it.

44 Contract and conveyance

(1) This section applies where a contract for a land transaction is entered into under which the transaction is to be completed by a conveyance.

(2) A person is not regarded as entering into a land transaction by reason of entering into the contract, but the following provisions have effect.

(3) If the transaction is completed without previously having been substantially performed, the contract and the transaction effected on completion are treated as parts of a single land transaction.

In this case the effective date of the transaction is the date of completion.

(4) If the contract is substantially performed without having been completed, the contract is treated as if it were itself the transaction provided for in the contract.

In this case the effective date of the transaction is when the contract is substantially performed.

(5) A contract is "substantially performed" when--

(a) the purchaser takes possession of the whole, or substantially the whole, of the subject-matter of the contract, or

(b) a substantial amount of the consideration is paid or provided.

(6) For the purposes of subsection (5)(a)--

(a) a purchaser takes possession if he receives, or becomes entitled to receive, rents and profits, and

(b) it is immaterial whether the purchaser takes possession under the contract or under a licence or lease of a temporary character.

(7) For the purposes of subsection (5)(b) a substantial amount of the consideration is paid or provided--

(a) if none of the consideration is rent, where the whole or substantially the whole of the consideration is paid or provided;

(b) if the only consideration is rent, when the first payment of rent is made;

(i) the whole or substantially the whole of the consideration other than rent is paid or provided, or

(ii) the first payment of rent is made.

(8) Where subsection (4) applies and the contract is subsequently completed by a conveyance--

(a) both the contract and the transaction effected on completion are notifiable transactions, and

(b) tax is chargeable on the latter transaction to the extent (if any) that the amount of tax chargeable on it is greater than the amount of tax chargeable on the contract.

(9) Where subsection (4) applies and the contract is (to any extent) afterwards rescinded or annulled, or is for any other reason not carried into effect, the tax paid by virtue of that subsection shall (to that extent) be repaid by the Inland Revenue.

Repayment must be claimed by amendment of the land transaction return made in respect of the contract.

(10) In this section--

(a) references to completion are to completion of the land transaction proposed, between the same parties, in substantial conformity with the contract; and

(b) "contract" includes any agreement and "conveyance" includes any instrument.

45 Contract and conveyance: effect of transfer of rights

(1) This section applies where--

(a) a contract for a land transaction ("the original contract") is entered into under which the transaction is to be completed by a conveyance, and

(b) there is an assignment, subsale or other transaction (relating to the whole or part of the subject-matter of the original contract) as a result of which a person other than the original purchaser becomes entitled to call for a conveyance to him.

References in the following provisions of this section to a transfer of rights are to any such assignment, subsale or other transaction.

(2) The transferee is not regarded as entering into a land transaction by reason of the transfer of rights, but section 44 (contract and conveyance) has effect in accordance with the following provisions of this section.

(3) That section applies as if there were a contract for a land transaction (a "secondary contract") under which--

(a) the transferee is the purchaser, and

(b) the consideration for the transaction is--

(i) so much of the consideration under the original contract as is referable to the subject-matter of the transfer of rights and is to be given (directly or indirectly) by the transferee or a person connected with him, and

(ii) the consideration given for the transfer of rights.

The substantial performance or completion of the original contract at the same time as, and in connection with, the substantial performance or completion of the secondary contract shall be disregarded.

(4) Where there are successive transfers of rights, subsection (3) has effect in relation to each of them.

The substantial performance or completion of the secondary contract arising from an earlier transfer of rights at the same time as, and in connection with, the substantial performance or completion of the secondary contract arising from a subsequent transfer of rights shall be disregarded.

(5) Where a transfer of rights relates to part only of the subject-matter of the original contract, subsection (8)(b) of section 44 (restriction of charge to tax on subsequent conveyance) has effect as if the reference to the amount of tax chargeable on that contract were a reference to an appropriate proportion of that amount.

(6) Section 839 of the Taxes Act 1988 (connected persons) applies for the purposes of subsection (3)(b)(i).

(7) In this section "contract" includes any agreement and "conveyance" includes any instrument.

46 Options and rights of pre-emption

(1) The acquisition of--

(a) an option binding the grantor to enter into a land transaction, or

(b) a right of pre-emption preventing the grantor from entering into, or restricting the right of the grantor to enter into, a land transaction,

is a land transaction distinct from any land transaction resulting from the exercise of the option or right.

They may be "linked transactions" (see section 108).

(2) The reference in subsection (1)(a) to an option binding the grantor to enter into a land transaction includes an option requiring the grantor either to enter into a land transaction or to discharge his obligations under the option in some other way.

(3) The effective date of the transaction in the case of the acquisition of an option or right such as is mentioned in subsection (1) is when the option or right is acquired (as opposed to when it becomes exercisable).

(4) Nothing in this section applies to so much of an option or right of pre-emption as constitutes or forms part of a land transaction apart from this section.

47 Exchanges

(1) Where a land transaction is entered into by the purchaser (alone or jointly) wholly or partly in consideration of another land transaction being entered into by him (alone or jointly) as vendor, this Part applies in relation to each transaction as if each were distinct and separate from the other.

(2) A transaction is treated for the purposes of this Part as entered into by the purchaser wholly or partly in consideration of another land transaction being entered into by him as vendor in any case where an obligation to give consideration for a land transaction that a person enters into as purchaser is met wholly or partly by way of that person entering into another transaction as vendor.

(3) As to the amount of the chargeable consideration in the case of exchanges and similar transactions, see--

paragraphs 5 and 6 of Schedule 4 (exchanges, partition etc), and
section 58 (relief for certain exchanges of residential property).

Chargeable interests, chargeable transactions and chargeable consideration

48 Chargeable interests

(1) In this Part "chargeable interest" means--

(a) an estate, interest, right or power in or over land in the United Kingdom, or

(b) the benefit of an obligation, restriction or condition affecting the value of any such estate, interest, right or power,

other than an exempt interest.

(2) The following are exempt interests--

(a) any security interest;

(b) a licence to use or occupy land;

(i) a tenancy at will;

(ii) an advowson, franchise or manor.

(3) In subsection (2)--

(a) "security interest" means an interest or right (other than a rentcharge) held for the purpose of securing the payment of money or the performance of any other obligation; and

(b) "franchise" means a grant from the Crown such as the right to hold a market or fair, or the right to take tolls.

(4) In the application of this Part in Scotland the reference in subsection (3)(a) to a rentcharge shall be read as a reference to a feu duty or a payment mentioned in section 56(1) of the Abolition of Feudal Tenure etc. (Scotland) Act 2000 (asp 5).

(5) The Treasury may by regulations provide that any other description of interest or right in relation to land in the United Kingdom is an exempt interest.

(6) The regulations may contain such supplementary, incidental and transitional provision as appears to the Treasury to be appropriate.

49 Chargeable transactions

(1) A land transaction is a chargeable transaction if it is not a transaction that is exempt from charge.

(2) Schedule 3 provides for certain transactions to be exempt from charge.

Other transactions are exempt from charge under other provisions of this Part.

50 Chargeable consideration

(1) Schedule 4 makes provision as to the chargeable consideration for a transaction.

(2) The Treasury may by regulations amend or repeal the provisions of this Part relating to chargeable consideration and make such other provision as appears to them appropriate with respect to--

(a) what is to count as chargeable consideration, or

(b) the determination of the amount of chargeable consideration.

(3) The regulations may make different provision in relation to different descriptions of transaction or consideration and different circumstances.

51 Contingent, uncertain or unascertained consideration

(1) Where the whole or part of the chargeable consideration for a transaction is contingent, the amount or value of the consideration shall be determined for the purposes of this Part on the assumption that the outcome of the contingency will be such that the consideration is payable or, as the case may be, does not cease to be payable.

(2) Where the whole or part of the chargeable consideration for a transaction is uncertain or unascertained, its amount or value shall be determined for the purposes of this Part on the basis of a reasonable estimate.

(3) In this Part--

"contingent", in relation to consideration, means--
(a)
that it is to be paid or provided only if some uncertain future event occurs, or
(b)
that it is to cease to be paid or provided if some uncertain future event occurs; and
"uncertain", in relation to consideration, means that its amount or value depends on uncertain future events.

(4) This section has effect subject to--

section 80 (adjustment where contingency ceases or consideration is ascertained), and
section 90 (application to defer payment in case of contingent or uncertain consideration).

52 Annuities etc: chargeable consideration limited to twelve years' payments

(1) This section applies to so much of the chargeable consideration for a land transaction as consists of an annuity payable--

(a) for life, or

(b) in perpetuity, or

(d) for a definite period exceeding twelve years.

(2) For the purposes of this Part the consideration to be taken into account is limited to twelve years' annual payments.

(3) Where the amount payable varies, or may vary, from year to year, the twelve highest annual payments shall be taken.

No account shall be taken for the purposes of this Schedule of any provision for adjustment of the amount payable in line with the retail price index.

(4) References in this section to annual payments are to payments in respect of each successive period of twelve months beginning with the effective date of the transaction.

(5) For the purposes of this section the amount or value of any payment shall be determined (if necessary) in accordance with section 51 (contingent, uncertain or unascertained consideration).

(6) References in this section to an annuity include any consideration (other than rent) that falls to be paid or provided periodically.

References to payment shall be read accordingly.

(7) Where this section applies--

(a) section 80 (adjustment where contingency ceases or consideration is ascertained) does not apply, and

(b) no application may be made under section 90 (application to defer payment in case of contingent or uncertain consideration).

53 Deemed market value where transaction involves connected company

(1) Where the purchaser is a company and--

(a) the vendor is connected with the purchaser, or

(b) some or all of the consideration for the transaction consists of the issue or transfer of shares in a company with which the vendor is connected,

the chargeable consideration for the transaction shall be taken to be not less than the market value of the subject matter of the transaction as at the effective date of the transaction.

(2) Section 839 of the Taxes Act 1988 (connected persons) has effect for the purposes of this section.

(3) In this section--

"company" means any body corporate;
"shares" includes stock and the reference to shares in a company includes a reference to securities issued by a company.

(4) Where this section applies paragraph 1 of Schedule 3 (exemption of transactions for which there is no chargeable consideration) does not apply.

But this section has effect subject to any other provision affording exemption or relief from stamp duty land tax.

(5) This section is subject to the exceptions provided for in section 54.

54 Exceptions from deemed market value rule

(1) Section 53 (chargeable consideration: transaction with connected company) does not apply in the following cases.

In the following provisions "the company" means the company that is the purchaser in relation to the transaction in question.

(2) Case 1 is where immediately after the transaction the company holds the property as trustee in the course of a business carried on by it that consists of or includes the management of trusts.

(3) Case 2 is where--

(a) immediately after the transaction the company holds the property as trustee, and

(b) the vendor is connected with the company only because of section 839(3) of the Taxes Act 1988.

(4) Case 3 is where--

(a) the vendor is a company and the transaction is, or is part of, a distribution of the assets of that company (whether or not in connection with its winding up), and

(b) it is not the case that--

(i) the subject-matter of the transaction, or

(ii) an interest from which that interest is derived,

has, within the period of three years immediately preceding the effective date of the transaction, been the subject of a transaction in respect of which group relief was claimed by the vendor.

Amount of tax chargeable

55 Amount of tax chargeable: general

(1) The amount of tax chargeable in respect of a chargeable transaction is a percentage of the chargeable consideration for the transaction.

(2) 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 consideration.

Table A: Residential

Relevant consideration	Percentage
Not more than £60,000	0%
More than £60,000 but not more than £250,000	1%
More than £250,000 but not more than £500,000	3%
More than £500,000	4%

Table B: Non-residential or mixed

Relevant consideration	Percentage
Not more than £150,000	0%
More than £150,000 but not more than £250,000	1%
More than £250,000 but not more than £500,000	3%
More than £500,000	4%

(3) For the purposes of subsection (2)--

(a) the relevant land is the land an interest in which is the main subject-matter of the transaction, and

(b) the relevant consideration is the chargeable consideration for the transaction,

subject as follows.

(4) If the transaction in question is one of a number of linked transactions--

(a) the relevant land is any land an interest in which is the main subject-matter of any of those transactions, and

(b) the relevant consideration is the total of the chargeable consideration for all those transactions.

(5) This section has effect subject to--

section 74 (collective enfranchisement by leaseholders), and
section 75 (crofting community right to buy),

(which provide for the rate of tax to be determined by reference to a fraction of the relevant consideration).

(6) In the case of a transaction for which the whole or part of the chargeable consideration is rent this section has effect subject to section 56 and Schedule 5 (amount of tax chargeable: rent).

(7) References in this Part to the "rate of tax" are to the percentage determined under this section.

56 Amount of tax chargeable: rent

Schedule 5 provides for the calculation of the tax chargeable where the chargeable consideration for a transaction consists of or includes rent.

Reliefs

57 Disadvantaged areas relief

(1) Schedule 6 provides for relief in the case of transactions relating to land in a disadvantaged area.

(2) In that Schedule--

Part 1 defines "disadvantaged area",
Part 2 relates to transactions where the land to which the transaction relates is wholly situated in a disadvantaged area,
Part 3 relates to transactions where the land to which the transaction relates is partly situated in a disadvantaged area, and
Part 4 contains supplementary provisions.

58 Relief for certain exchanges of residential property

(1) Where a dwelling ("the old dwelling") is acquired from an individual (whether alone or with other individuals) by a house-building company or a company connected with a house-building company, the chargeable consideration for the acquisition is taken to be nil if--

(a) the individual (whether alone or with other individuals) acquires from the house-building company a new dwelling,

(b) the individual--

(i) occupied the old dwelling as his only or main residence immediately before its acquisition, and

(ii) intends to occupy the new dwelling as his only or main residence,

(d) the area of land acquired by the house-building company or the connected company does not exceed the permitted area.

(2) Where the conditions in subsection (1)(a) to (c) are met but the area of land acquired by the house-building company or the connected company exceeds the permitted area, the chargeable consideration for the acquisition is taken to be the amount calculated by deducting the market value of the permitted area from the market value of the old dwelling.

(3) "Dwelling" includes land occupied and enjoyed with the dwelling as its garden or grounds.

(4) A building or part of a building is a "new dwelling" if--

(a) it has been constructed for use as a single dwelling and has not previously been occupied, or

(b) it has been adapted for use as a single dwelling and has not been occupied since its adaptation.

(5) A "house-building company" means a company that carries on the business of constructing or adapting buildings or parts of buildings for use as dwellings.

Section 839 of the Taxes Act 1988 (connected persons) applies for the purpose of determining whether a company is connected with a house-building company.

(6) The "permitted area", in relation to a dwelling, means land occupied and enjoyed with the dwelling as its garden or grounds that does not exceed--

(a) an area (inclusive of the site of the dwelling) of 0.5 of a hectare, or

(b) such larger area as is required for the reasonable enjoyment of the dwelling as a dwelling having regard to its size and character.

(7) Where subsection (6)(b) applies, the permitted area is taken to consist of that part of the old dwelling that would be the most suitable for occupation and enjoyment with the dwelling as its garden or grounds if the rest of the land were separately occupied.

(8) In this section--

(a) references to the acquisition of the new dwelling are to the acquisition, by way of grant or transfer, of a major interest in the dwelling;

(b) references to the acquisition of the old dwelling are to the acquisition, by way of transfer, of a major interest in the dwelling;

(c) references to the market value of a dwelling, or of an area of land, are to the market value of the major interest in the dwelling, or of that interest so far as it relates to the area in question.

59 Relocation relief

(1) Where a dwelling is acquired from an employee (whether alone or with other individuals) by the employer or a relocation company, the acquisition is exempt from charge if--

(a) the individual occupied the dwelling as his only or main residence at some time in the period of one year ending with the date of the acquisition,

(b) the acquisition is made in connection with a change of residence by the individual resulting from relocation of employment,

(d) the area of land acquired does not exceed the permitted area.

(2) Where the conditions in subsection (1)(a) to (c) are met but the area of land acquired exceeds the permitted area, the chargeable consideration for the acquisition is taken to be the amount calculated by deducting the market value of the permitted area from the market value of the dwelling.

(3) "Relocation of employment" means a change of the individual's place of employment due to--

(a) his becoming an employee of the employer,

(b) an alteration of the duties of his employment with the employer, or

(4) A change of residence is one "resulting from" relocation of employment if--

(a) the change is made wholly or mainly to allow the individual to have his residence within a reasonable daily travelling distance of his new place of employment, and

(b) the individual's former residence is not within a reasonable daily travelling distance of that place.

The employee's "new place of employment" means the place where he normally performs, or is normally to perform, the duties of his employment after the relocation.

(5) "Relocation company" means--

(a) a company carrying on a business consisting of or including provision of the service of acquiring dwellings in connection with a change of residence resulting from relocation of employment, or

(b) a company connected with such a company.

Section 839 of the Taxes Act 1988 (connected persons) applies for the purposes of paragraph (b).

(6) "Dwelling" includes land occupied and enjoyed with the dwelling as its garden or grounds.

(7) The "permitted area", in relation to a dwelling, means land occupied and enjoyed with the dwelling as its garden or grounds that does not exceed--

(a) an area (inclusive of the site of the dwelling) of 0.5 of a hectare, or

(b) such larger area as is required for the reasonable enjoyment of the dwelling as a dwelling having regard to its size and character.

(8) Where subsection (7)(b) applies, the permitted area is taken to consist of that part of the dwelling that would be the most suitable for occupation and enjoyment with the dwelling as its garden or grounds if the rest of the land were separately occupied.

(9) In this section--

(a) references to the acquisition of the dwelling are to the acquisition, by way of transfer, of a major interest in the dwelling;

(b) references to the market value of the dwelling, or of an area of land, are to the market value of the major interest in the dwelling, or of that interest so far as it relates to the area in question;

(c) references to an employee include a prospective employee (and references to the employer are to be construed accordingly).

60 Compulsory purchase facilitating development

(1) A compulsory purchase facilitating development is exempt from charge.

(2) In this section "compulsory purchase facilitating development" means--

(a) in relation to England and Wales or Scotland, the acquisition by a person of a chargeable interest in respect of which that person has made a compulsory purchase order for the purpose of facilitating development by another person;

(b) in relation to Northern Ireland, the acquisition by a person of a chargeable interest by means of a vesting order made for the purpose of facilitating development by a person other than the person who acquires the interest.

(3) For the purposes of subsection (2)(a) it does not matter how the acquisition is effected (so that provision applies where the acquisition is effected by agreement).

(4) In subsection (2)(b) a "vesting order" means an order made under any statutory provision to authorise the acquisition of land otherwise than by agreement.

(5) In this section "development"--

(a) in relation to England and Wales, has the same meaning as in the Town and Country Planning Act 1990 (c. 8) (see section 55 of that Act);

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