April 17 2002
the full text of the Chancellor's speech here!)
STAMP DUTY ON UK LAND AND BUILDINGS
The Chancellor today announced a package of measures to tackle
current avoidance of stamp duty on commercial property transactions
and launched major reform to modernise stamp duty on land and
buildings in the UK.
Legislation will be included in Finance Bill 2002 to discourage
range of techniques currently used to avoid stamp duty on high-value
property deals. Left unchecked, this activity represents a major
threat to the Exchequer. The Government is therefore determined
take steps to ensure stamp duty is paid on the full range of
transactions in UK property. These measures bring forward a
fundamental part of the longer-term modernisation of stamp duty.
Modernising stamp duty
The main reforms are set out in a consultative document published
today, which seeks views on the detail of the modernised regime.
Legislation will be included in the Finance Bill 2003 to reform
duty. The reform will build on the 2002 measures to tackle avoidance,
- support the Government's e-business agenda, in particular
introduction of paperless electronic conveyancing, and
- update the framework of the tax, bringing it into line with
Individual home-buyers and their agents will see no immediate
but the reform will help pave the way for purchases to be conducted
electronically in the future, making the house-buying process
and more efficient.
In welcoming the changes, the Economic Secretary to the Treasury,
Ruth Kelly, said:
"The case for change is overwhelming. Stamp duty on UK land
buildings is outdated. It does not reflect current commercial
practice and it is not suited to the rapidly developing world
e-business. Moreover we are determined to stop the growing avoidance
of stamp duty by a minority at the expense of the majority."
DETAILS: 2002 MEASURES
In order to discourage certain avoidance devices, legislation
brought forward in the 2002 Finance Bill to:
- 'claw back' group relief where UK property has been transferred
from one company to another in the same group, and within two
the company in receipt of the property leaves the group.
- 'claw back' the partial relief under Section 76 FA 1986 where
company acquires the whole or part of an undertaking of another
company in exchange for shares in the acquiring company, and
two years control of the acquiring company passes to a third
- extend the penalty regime for documents executed in the UK
documents (relating to UK land or buildings) executed outside
UK. Penalties for the late stamping of documents executed outside
the UK will in future run from 30 days after the date of execution.
- bring contracts for the sale of interests in land with a market
value in excess of #10 million into charge, to tackle the avoidance
of stamp duty on large deals through 'resting on contract' -
companies deliberately do not complete a transaction in the
traditional way to avoid paying stamp duty on the document that
effectively transfers ownership of property.
Taken together, these measures will ensure stamp duty is payable
where a transfer artificially 'rests' on contract, discourage
of companies set up to avoid stamp duty on UK property, and
increasing exploitation of the existing stamp duty reliefs for
DETAILS: MODERNISING STAMP DUTY ON LAND AND BUILDINGS IN THE
Impact of the revised regime
For the vast majority of individual house-buyers, tenants and
agents, and for most businesses, stamp duty will continue to
payable on transactions in the usual way, though there will
changes to the administration of the tax. Modernisation will
way for future changes to the house-buying process, in particular,
the introduction of electronic documents that will, over time,
replace the current paper-based systems.
For more complex, higher-value commercial transactions, the
regime will be less open to abuse and will provide a streamlined
approach to assessing and collecting any stamp duty due. The
consultation will invite views on the detail of how this will
Scope of the charge
The reformed stamp duty charge will apply to all transactions
respect of interests in UK land and buildings. So, as now, it
apply to purchases of freeholds and leaseholds over #60,000,
certain new leases. The reform will not have any significant
on either the stamp duty, or the main stamp duty reserve tax
charge on shares.
It is anticipated that all existing reliefs and provisions will
carried forward to the revised regime, unless they are no longer
needed or could be exploited to undermine that regime. In particular,
the stamp duty relief for land and property in disadvantaged
(see press notice HMT1 for details on this relief) will be carried
The revised regime will not apply to:
- transfers of, and agreements to transfer, goodwill. These
exempted from stamp duty with effect from 23 April 2002. This
change puts goodwill on a consistent footing with other
intellectual property, and will bring immediate benefit to sales
UK businesses. (see press notice REV/C&E1 for further details)
- transfers of debts. These will be removed from the scope of
modernised stamp duty regime with effect from late 2003 and
make it easier for companies to raise finance through debt
factoring and the issue of bonds secured on debt portfolios.
A key objective of modernising is to stop avoidance and ensure
everyone pays their full share of the tax. Under the revised
a range of current avoidance techniques will be stopped.
In particular, there will be specific rules to stop avoidance
the use of companies and non-corporate vehicles (such as trusts
partnerships), often known as "special purpose vehicles" or
Under the revised stamp duty regime, the Government proposes
create a charge triggered in certain circumstances by transfers
shares or interests in a limited range of property-owning vehicles.
Broadly, the charge will be equivalent to the stamp duty that
be due if the land and buildings contained in the vehicle had
transferred directly to a new owner. The intention is to put
stamp duty treatment of property transfers by way of special
on the same footing as transfers by way of sale.
The charge will apply to all qualifying transactions taking
after the introduction of the rules, including future transactions
vehicles already in existence, and regardless of whether they
registered inside or outside the UK.
The precise scope of this charge, and the type of vehicles affected,
will be the subject of detailed discussion in the summer as
the wider consultation.
Stamp duty on new leases
The Government also wishes to review the current stamp duty
the grant of new leases (known as "lease duty"). At present
charge does not always reflect modern commercial practice nor
value of the lease. The Government would welcome views on the
methodology for charging new leases, with the presumption that
revised charge will:
- correspond more closely to the stamp duty charge on a freehold
transfer or lease assignment of a property of similar value;
- better reflect modern commercial practice; and
- discourage the use of leases to reduce the stamp duty charge
sale of freehold property.
Stamp duty on shares
In the main, transfers of shares and securities are charged
duty reserve tax (SDRT), which was introduced in 1986. This
will not disturb the scope and impact of the main SDRT charge
stamp duty as it applies to share transfers.
Stamp duty is over three hundred years old and the legislation
last consolidated in 1891. It is a charge on documents that
property, and most of the yield arises from conveyances of land
transfers of shares. The modernising proposals focus on the
transactions in UK land and buildings (the existing rules for
will remain unchanged).
When duty is paid, stamps are still impressed physically on
document concerned. Unlike more modern taxes there is no provision
for the tax to be collected directly from taxpayers by assessment.
The main sanction for failure to pay is that the document cannot
registered with the UK land registries or other registry, or
evidence in court proceedings.
Stamp duty on land and property currently raises over #4 billion
which, about #300 million relates to lease duty). It is paid
year by around 1.4 million individuals buying houses, around
companies purchasing commercial property, land or housing stock,
around 250,000 individuals and businesses taking out new leases
residential and commercial property.
During the last few years, however, there has been a growth
arrangements designed to avoid stamp duty on transfers of land
buildings, relying on amongst other things the lack of enforcement
A tax on paper documents is simply not suited to modern commercial
practice, e-business or future developments in the house-buying
process. In particular, a primary reason for modernising stamp
is to introduce a regime that is fully able to support wider
Government plans to facilitate e-business. For England and Wales,
Land Registry is to publish a major consultation on the plans
e-conveyancing shortly. The Keeper of the Registers of Scotland
intends to consult on the results of the recently completed
"Automated Registration of Title to Land" later this year. The
Revenue has worked closely with both these offices over the
months, and it is generally agreed that, ultimately, such electronic
systems will encompass the collection of stamp duty.
Copies of the consultative document are available on the Inland
Revenue website at www.inlandrevenue.gov.uk/consult_new.
Alternatively, they can be obtained from the following address:
Inland Revenue Visitors Information Centre Ground Floor, South
Wing, Bush House, Strand, London WC2B 4RD
The closing date for responses is 19 July 2002.
A partial Regulatory Impact Assessment has been prepared for
reform of stamp duty and is available on the Revenue website
the above address.
HM TREASURY PRESS OFFICE
Non-media enquiries: 020 7270 4558
INLAND REVENUE PRESS OFFICE
Non-media enquiries: 020 7944 3000
(office hours only)
GOVERNMENT DEPARTMENT INTERNET SITES
Further information and all published documents relating to
2002 may be found on the Internet at the following addresses:
HM Treasury www.hm-treasury.gov.uk
Inland Revenue www.inlandrevenue.gov.uk
HM Customs and Excise www.hmce.gov.uk