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SDLT – Some problem areas London, 27 April, 2005

SDLT – Some problem areas London, 27 April, 2005. Patrick Cannon, 24 Old Buildings www.patrickcannon.net. Withdrawal of Disadvantaged Exemption. Withdrawn for commercial property from midnight on Budget Day Reasons for withdrawal? Saved for contracts entered into up to midnight

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SDLT – Some problem areas London, 27 April, 2005

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  1. SDLT – Some problem areasLondon,27 April, 2005 Patrick Cannon, 24 Old Buildings www.patrickcannon.net

  2. Withdrawal of Disadvantaged Exemption • Withdrawn for commercial property from midnight on Budget Day • Reasons for withdrawal? • Saved for contracts entered into up to midnight • Conditional contract sufficient • No variation, assignment, subsale etc

  3. Raising of Residential Threshold • BN01 – raised from £60k to £120k • What is really going on here – helping first time buyers? • Purchaser’s total price ceiling • Seller benefits – price increases through planning restrictions, low interest rates and rising incomes, tax free disposal • First time buyers still pay the same amount as prices rise to reflect the saving

  4. Group Relief Claw-back A to B to C ? A to C to B? New ‘successive’ transfers charge if control of B changes Trennery v West? A B C

  5. Group Relief Mini-GAAR • New sub-para (4A) of para 2 Sch 7: Group relief not allowed if transaction– • Not bona fide commercial reasons, or • Forms part of arrangements where a main purpose is the avoidance of liability to tax How much of a threat is this really?

  6. SDLT Scheme Disclosure • From 1 July 2005 for commercial property of £5m or above • Arrangements enabling an SDLT advantage • No reference number procedure • Promoters (5 days) and users (30 days) • Aimed especially at non- ‘land transactions’ so no tax return filed • How does legal privilege apply? • RIP – para 2: no impact on advisers who assist clients to understand SDLT ‘and plan their property and other transactions appropriately’: what does this mean?

  7. Lease variations saga Finance Act 2003: all lease variations taxable Finance Act 2004: lease variations taxable only where variation: (a) took effect as grant of new lease; • reduced rent – acquisition by lessee; • reduced term – acquisition by lessor. Finance Bill 2005: all other lease variations once again taxable ‘Variations’ outside a lease ? Break clauses ?

  8. Leases to Nominees • Grant of lease to nominee – was disregarded for SDLT but intended to be fully taxable by FB ‘No1’ 2005 • Avoid nominee being ‘connected’ with principal otherwise minimum mv charge • Leases for ‘one peppercorn if demanded’ not taxable if nominee unconnected

  9. Tax Return Disclosure in SDLT • Langham v Veltema [2004] EWCA Civ 193 • Inland Revenue Guidance 23/12/04 • SDLT implications ? • What about schemes that don’t involve a tax return?

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