Stamp Taxes Bulletin
The Revenue issued its third Stamp Taxes Bulletin on 24 October and this includes articles covering the following matters.
New stamp duty régime
Legislation will be introduced in the Finance Bill 2003 to introduce reforms to the stamp duty charge on all transactions in respect of interests in and rights over United Kingdom land and buildings. The legislation will be implemented towards the end of 2003.
Stamp Taxes Bulletin
The Revenue issued its third Stamp Taxes Bulletin on 24 October and this includes articles covering the following matters.
New stamp duty régime
Legislation will be introduced in the Finance Bill 2003 to introduce reforms to the stamp duty charge on all transactions in respect of interests in and rights over United Kingdom land and buildings. The legislation will be implemented towards the end of 2003.
Following the reform, the Revenue will no longer need to see documents related to transfers, nor will physical stamping of documents take place. Instead, transactions which are within the scope of stamp duty will have to be notified to Inland Revenue Stamp Taxes using a standard notification form. In place of the stamped impression on documents under the current régime, the Revenue is considering the possibility of issuing a stamp duty certificate which can be attached to the documents when they are presented for registration.
The new régime will not apply to transfers of goodwill which are exempt from stamp duty. Furthermore, transfers of debt will be removed from the scope of the stamp duty régime.
An avoidance scheme
The Bulletin discusses a much-publicised stamp duty avoidance arrangement whereby the purchase of a property at a price of £700,000 could be reduced by structuring the transaction so that the purchaser paid a price of £210,000 for an option to acquire the property at a price of £490,000. In this way, duty at 3 per cent only would be payable on the consideration of £490,000.
The Revenue contends that, since all relevant facts and circumstances affecting liability to duty must be 'fully and truly set forth in the instrument', it will be necessary when presenting the transfer document reciting the purchase price of £490,000, as referred to above, to produce the option agreement for stamping. Furthermore, the rate of duty on the transfer would not be 3 per cent as the transfer stems from the option agreement and therefore forms part of a larger series of transactions with an aggregate value exceeding £500,000. A certificate for value for £500,000 could not therefore be validly inserted in the transfer document and duty would be payable at 4 per cent.
As regards the duty on the option agreement, each case will be treated on its merits, but the Stamp Office is likely to contend that the option agreement is itself part of a series of transactions so that any certificate of value included in it must take into account the price to be paid upon exercise of the option.
Disadvantaged areas
Section 92, Finance Act 2001 provided for an exemption from stamp duty for the transfer of certain lower value properties in designated disadvantaged areas of the United Kingdom. The exemption is based upon postcodes and the Revenue's website now includes a search facility to establish whether a given postcode falls within the relief or not.
Contracts Unit
A specially dedicated Unit has been established at the Manchester Stamp Office to deal with all aspects of the application of the legislation at section 115 of, and Schedule 36 to, the Finance Act 2002. This legislation deals with contracts for the sale of interests in United Kingdom land where the purchase consideration in respect of that land exceeds £10 million. The Revenue requests that matters relating to section 115 are not referred to other Stamp Offices. Details of the new Unit are as follows: Stamp Taxes Contracts Unit, Manchester Stamp Office, Upper 5th Floor, Royal Exchange, Exchange Street, Manchester M2 7EB; telephone 0161 8396260; fax 0161 8343350.
(Source: Stamp Taxes Bulletin No 3.)
Venture capital trusts
New regulations have been made to prevent investments made by venture capital trusts in companies which are involved in certain kinds of corporate restructuring from ceasing to qualify for the scheme. The regulations have application to restructuring that takes place on or after 21 March 2000 and they are entitled The Venture Capital Trust (Exchange of Shares and Securities) Regulations 2002 (SI 2002 No 2661).
To meet the rules of the scheme, at least 70 per cent of a venture capital trust's investments must be made in small, higher risk trading companies and at least 30 per cent of the trust's investment in such qualifying holdings must comprise ordinary shares.
Where a venture capital trust holds shares in another company which is sold, undergoes a merger or internal capital reconstruction, the venture capital trust may not be able to sell its investment, but it may have to exchange it for shares or securities in the purchaser or post-merger company, or for different shares or securities in the original company. The existing rules of the scheme mean that any shares acquired in this way do not count towards the 70 or 30 per cent conditions.
The new regulations will now allow the investment to qualify, if the reason that it would not count towards the 70 or 30 per cent conditions is because it was received in exchange for other shares or securities that were qualifying investments.
In all other cases, venture capital trusts will now have a period of up to three years to dispose of the new investment (two years where the investments are not in unquoted companies), during which period the investment will be treated as though it counted towards the 70 and 30 per cent conditions.
(Source: Inland Revenue press release dated 23 October 2002.)
Change of agent's details
The Revenue has posted a note on its website requesting that correspondence with local tax offices, to notify the Revenue of changes to an agent's name, address or telephone number, should be marked 'For the attention of the SA agent maintainer'.
Loans by SSAPs
The Revenue has confirmed that, where a small self-administered pension scheme has made a loan to a company, interest on the loan paid by the company on or after 1 October 2002 should be paid gross.
(Source: Inland Revenue notice dated 22 October 2002.)