UK: Stamp Duty Land Tax

Article by Mr Charles Farrer and Ms Reena Patel

• 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

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

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

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

• In the above example, if the contract is varied after 10^th July 2003 there is no difference to the treatment of the transaction. It is still subject to Stamp Duty on completion.

• However, if in that example the purchaser enters into a sub-sale, SDLT will be chargeable on completion of that second contract if that occurs on or after 1^st December 2003.

• Where the contract is entered into after 10^th July 2003 but is completed before 1^st December 2003 there is no SDLT.

• Where a contract is entered into after 10^th July 2003 and is completed on or after 1^st December 2003, SDLT will be payable, even where substantial performance has occurred before 1^st December 2003. SDLT will be payable on completion of the contract.

• Where a contract is entered into after 10^th July 2003 and substantial performance occurs on or after 1^st December 2003 followed by completion SDLT will be payable on substantial performance.