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News
Revenue news
Nil-rate band trusts
The Revenue has published a guidance note in response to enquiries about the interaction between stamp duty land tax and nil-rate band discretionary trusts.
News
Revenue news
Nil-rate band trusts
The Revenue has published a guidance note in response to enquiries about the interaction between stamp duty land tax and nil-rate band discretionary trusts.
Where the personal representatives discharge the pecuniary legacy by payment of the specified sum to the trustees of a nil-rate band discretionary trust, no SDLT issue arises. However, in many cases where the personal representatives satisfy the legacy otherwise than by payment of the specified sum, a liability may arise on the transfer of the matrimonial home or other land to the surviving spouse or residuary trustees.
The transfer of an interest in land, whether to a residuary beneficiary or to any other person, and whether in satisfaction of an entitlement under a will or not, is a land transaction for SDLT purposes. The question is whether the transferee gives any chargeable consideration for the transfer. Very often a beneficiary gives no chargeable consideration for the transfer of land under a will. However, transactions in connection with nil-rate band discretionary trusts may result in the beneficiary giving chargeable consideration.
The commonest examples of such transactions, and their SDLT consequences, follow:
* the trustees accept the surviving spouse's promise to pay in satisfaction of the pecuniary legacy and in consideration of that promise land is transferred to the surviving spouse. The promise to pay is chargeable consideration for SDLT purposes;
* the trustees accept the personal representatives' promise to pay in satisfaction of the pecuniary legacy and land is transferred to the surviving spouse in consideration of the spouse accepting liability for the promise. The acceptance of liability for the promise is chargeable consideration for SDLT purposes. The amount of chargeable consideration is the amount promised (not exceeding the market value of the land transferred);
* land is transferred to the surviving spouse and the spouse charges the property with payment of the amount of the pecuniary legacy. The trustees accept this charge in satisfaction of the pecuniary legacy. The charge is money's worth and so is chargeable consideration for SDLT purposes;
* the personal representatives charge land with the payment of the pecuniary legacy. The personal representatives and trustees also agree that the trustees have no right to enforce payment of the amount of the legacy personally against the owner of the land for the time being. The trustees accept this charge in satisfaction of the legacy. The property is transferred to the surviving spouse subject to the charge. There is no chargeable consideration for SDLT purposes provided that there is no change in the rights or liabilities of any person in relation to the debt secured by the charge.
With regard to the SDLT consequences of a deed of variation made by beneficiaries after the death of the deceased person, such a deed may effect a land transaction if it alters the beneficial interests in land, for example by settling land in trust. However, placing a charge on land is not in itself a land transaction. In addition, FA 2003, Sch 3 para 4 provides that, under certain conditions, a land transaction effected by a deed of variation is exempt from charge.
(www.inlandrevenue.gov.uk)
Local will do
An item published on the Revenue website relating to the submission of forms 42 and reported in Update, Taxation, 11 November 2004, implied that forms 42 should be sent to the Revenue's head office in order to meet the 30 November 2004 deadline, rather than to local offices. The Revenue has confirmed that although it would prefer forms to be sent direct to Somerset House, companies or their advisers can still send the reports to local offices if more convenient. Arrangements are in place for such reports to be sent on by any office that receives them.
Pre-Budget Report
The Chancellor of the Exchequer will deliver the 2004 pre-Budget statement on 2 December 2004.
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