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Stamp Duty

Stamp Duty Land Tax

This year’s SDLT changes are a mixed bag, there is some relaxation in the administrative burden of this tax, yet more tinkering with SDLT and partnerships and the closure of a couple of loopholes which are being used to avoid SDLT.

Mr Darling had a lot to say about green issues in his speech so the extension of the SDLT relief on new zero-carbon houses to new zero-carbon flats is no surprise. The form of the relief provides complete elimination of SDLT on the first purchase of a zero-carbon flat costing up to £500,000 and a reduction of £15,000 on the SDLT charge on flats over £500,000. However, there is no relief for the second and subsequent purchasers or on existing flats which are converted to meet the zero-carbon criteria. So, how effective this measure will be in encouraging the construction of “green” buildings remains to be seen. 

As regards the changes to the SDLT provisions in respect of partnerships, HMRC is constantly trying to prevent avoidance of SDLT using partnerships.  Last year the measures introduced to prevent SDLT avoidance proved to be the proverbial “sledgehammer to crack a walnut”. Mr Darling has effectively reversed these measures with the added advantage that today’s announcement will be retrospective.

Turning to the loopholes being closed, the 2008 Budget will prevent avoidance of SDLT which was being achieved by manipulating the reliefs available to corporate groups and those relating to alternate financing.

Raising the notification thresholds for SDLT will, presumably, have a “green” effect as there will be less SDLT forms produced and submitted. However, whilst the notification thresholds have been raised there is no change in the bands or SDLT rates. 

Stamp Duty

There is a welcome change to stamp duty charges. Currently, where there is a transfer of ownership of shares, which is not exempt, the instrument or document transferring those shares must be stamped. Stamp duty is payable on the stamping of this document at a rate of 0.5% of the consideration payable for the shares, rounded up to the nearest £5.

Where the consideration is such that the stamp duty charge arising would be less than £5 the charge is fixed at £5. This has led to a high cost to business as 68% of transfer instruments submitted are currently subjected to the minimum £5 duty. The proposed measure will exempt these transfer instruments/documents from the requirement for stamping and therefore from the payment of the minimum fee.