With effect from 15 November 2017, a new legislative framework for Document Duty on certain transactions involving real property will come into force in Guernsey. The original principal law from 1973 will be replaced with an updated law and an extended new law that captures additional transactions will also come into force alongside it.
Of particular note, the extended law will bring transactions not directly transferring a real property interest but conferring on a 'transferee' a significant benefit in real property (ie. the benefit of ownership of real property, such as the right to control, enjoy, occupy or receive income deriving from it) into the taxation regime when formerly no duty was payable. The new duty will be payable on the market value of the Guernsey property concerned.
Along with this change are revisions to Document Duty assessments in the more usual conveyancing transaction. At the meeting of the States of Deliberation on 6 September, Gavin St Pier as President of the Policy and Resources Committee announced a review of the 5% permitted allowance as a valuation of any movable contents included in a property transaction. The effect of the allowance was that Document Duty on a conveyance was charged on only 95% of the total transaction value and, in the view of the Policy and Resources Committee, this was "no longer appropriate in most cases". It was proposed that lowering it to 1% could raise an additional £0.5 million per annum.
Following a consultation process with property practitioners of the Guernsey Bar, a consensus was reached that a pragmatic approach should be adopted and that the 'basic default deduction' in respect of contents would be permitted at a maximum of 2.5% of the total purchase price of any premises being sold.
In circumstances where the value of the contents can be shown to be greater than 2.5%, parties to the transaction can apply (with supporting documentation) for a greater deduction to be permitted.
Whilst the new legislative regime will commence on 15 November 2017, the change in practice as to the contents allowance will only apply from 1 January 2018.
This practical application of the new law is a welcome approach that will enable parties to a transaction promptly to commit their agreement to writing and anticipate their transaction costs, streamlining the process for routine property transactions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.