Stamp Duty Land Tax

Article by Mr Charles Farrer and Ms Reena Patel

Originally published November 2003

Stamp Duty

Stamp Duty Land Tax comes into force on 1st December 2003. This briefing note considers some of the principal differences between Stamp Duty and Stamp Duty Land Tax and the transitional provisions which will assist in determining which duty is to be paid.

Differences between Stamp Duty and Stamp Duty Land Tax

Voluntary

Not a criminal offence and only penalty is financial

Chargeable on instruments

Transfers of UK land must be stamped to be registered

Stamp duty applies where there is a sale normally for a cash consideration, stocks or securities

Instruments not relating to UK property or dealings do not need to be stamped if they have not been executed in the UK

Only the last sale in a chain of sub-sales is subject to Stamp Duty

Property swaps only stampable once on the higher value transaction

Charged on VAT regardless of whether or not election to waive exemption

Sanctions applied only if the document was presented for stamping

Stamp Duty Land Tax

Mandatory

Criminal and Civil penalty for non-compliance

Obligation on the purchaser (as defined by the Finance Act 2003) to make the return and to pay the tax

Chargeable on transactions

Land transaction not to be registered unless application accompanied by certificate from the Inland Revenue or self certificate from purchaser

Applies to any form of consideration

Irrelevant where instrument executed, charge to SDLT arises if in respect of UK property

Any transfer of rights is chargeable to SDLT and SDLT is payable for each sale (subject to sub-sale relief)

Property swaps now classed as two separate transactions, both fully chargeable to SDLT (relief available for residential developers)

Only charged on VAT if election made to waive exemption at the effective date

Custodial sentences can be imposed for non-compliance

†

Transitional Provisions

To determine whether a transaction is subject to Stamp Duty or Stamp Duty Land Tax please note:-

Where a contract was entered into before 11th July 2003 and there has been no subsequent variation there is no SDLT even where completion occurs on or after 1st December 2003. Stamp Duty will be payable on completion.

Where the contract was entered into and substantially performed before 11th July 2003 there is no SDLT even where completion occurs on or after 1st December 2003. Stamp Duty will be payable on completion.

In...