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HMRC internal manual

Stamp Duty Land Tax Manual

From
HM Revenue & Customs
Updated
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Section 75A Finance Act 2003, situations where HMRC accept that s.75A is unlikely to apply

In deciding whether s75A applies to a set of transactions, it is necessary to look at the arrangements as a whole rather than simply at each individual step in isolation. Even the transactions below could be part of a scheme that purports to mitigate Stamp Duty Land Tax. But in general HMRC accepts that, to the extent that the situations below genuinely stand alone, the transactions will be taxed appropriately under the normal Stamp Duty Land Tax rules and so s.75A will not be triggered.

  1. X, Y and Z are individuals who decide to establish a partnership to manage their investment portfolio. They transfer investment property and cash into that partnership at value. HMRC considers this to be a straightforward establishment of and transfer of property into a partnership.
  2. X, Y and Z are the partners of a partnership. The purpose of the partnership is to acquire and develop a large residential property into 6 flats. When the development is complete they disagree as to how to manage the completed development so the partnership is dissolved and the partnership property (the flats and any partnership monies) is divided among the partners. It is assumed here that the agreements and documents relating to creation of the partnership demonstrate that the intention was for the partnership to manage the property after development and that the dissolution of the partnership arises from an unforeseen disagreement. HMRC would not seek to apply s.75A to this situation as long as the general Stamp Duty Land Tax legislation has been applied to the creation and dissolution of the partnership.
  3. A property investment business is carried on by a company owned in equal shares by four family members. The company is to be sold to an unconnected third party. The four individuals establish a partnership to hold the properties that were held by the company but that aren’t included in the sale. There is a clear commercial reason for the properties to be transferred out of the company that is to be sold to the unconnected third party.
  4. A property lettings business is carried on by three individuals X, Y and Z through a partnership. X, Y and Z consider that, commercially, the best way to continue to carry on their business is through a company. They therefore decide to incorporate the business. X, Y and Z subscribe for shares in a new company in the same proportion as their respective partnership holdings. The properties are transferred to the company.
  5. X and Y are corporate partners in a joint property-letting venture. They are unconnected except through their shares in the partnership. The partnership owns one property. Y’s shareholders have accepted an offer from a third party, Z, to acquire all of its share capital. Z does not wish to continue to operate the business with X so the decision is taken to distribute the property to Y. There is a clear commercial reason for the transactions. The normal Stamp Duty Land Tax rules applied to the original acquisition of the property by the company.
  6. V sells land to X and at the same time X sells the land to P. P pays Stamp Duty Land Tax based on the full amount of consideration received by V.
  7. V sells land to X and at the same time X sells the land to P. P pays Stamp Duty Land Tax based on the full amount of consideration received by V. At a later date P sells the land to Y and Y pays the full amount of Stamp Duty Land Tax that arises from the consideration that P received.
  8. V sells two properties at arm’s length to third party purchasers N1 and N2. Subsequently, and in transactions which are not connected in any way with the purchases by N1 and N2, P buys both properties at arm’s length. It is assumed that there is no connection between the sale by V and the purchase by P.
  9. V grants a long lease to X. At a later stage, and in a transaction which is not connected in any way with the grant of the long lease, X assigns the lease to an unconnected third party P. P exercises a statutory right of enfranchisement. S.75A does not apply as regards to disposal by V and the acquisition by P because it is taxed appropriately under the normal Stamp Duty Land Tax rules.
  10. V grants an option to X to purchase land. Subsequently, and in a transaction which is not connected in any way with the grant of the option, X assigns the benefit of the option to an unconnected third party P. P exercises the option. There is no connection between the transactions.