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Trusts & Tax Law

We are solicitors in London WC2 and Gloucestershire UK

Our lawyers advise on all aspects of trusts and tax law including Stamp Duty Land Tax

Stamp Duty Land Tax, which was introduced on 1st December 2003, is a move away from a tax on documentation to a tax on transactions. No longer can one simply have a Transfer stamped by the Stamp Duty Office of the Inland Revenue. Instead a Land Transaction Return with some 71 questions must be completed in black ink in accordance with the new Inland Revenue requirements.

While Stamp Duty Land Tax has been introduced to remove certain loopholes, such as where the overall liability is reduced on a transaction involving a direct exchange of residential properties, the chief purpose of its arbitrary introduction appears to be to make use of the profession as tax gatherers. It increases the liability of business operators, large or small, multi-national or independent  who, already saddled with burdensome, time consuming and expensive legislation from Europe,  now have to meet a far greater liability to Stamp Duty on the grant of a new lease than was previously borne.

The completion of a Land Transaction Return will be very much more onerous than the current procedure and will require that a new tenant or buyer will have to sign the Return before the requisite certificate for registration of a new Freehold Purchase or a new Lease  can proceed at HM Land Registry.

The purpose behind making a buyer sign the Land Transaction Return is to ensure that in the event of an underpayment of Stamp Duty the Inland Revenue can take direct action against the buyer, which under the 1891 Stamp Act they could not.

It will no longer be possible to have documentation stamped in the Strand or other Stamp Duty Office of the Inland Revenue, or to discuss the circumstances in person with the Inland Revenue Stamp Duty Officers, who have previously been so helpful. The Land Transaction Return must be sent to Netherton on Merseyside.

For some this will mean that the registration process is slowed down by the need for correspondence to be sent to Netherton. Under the old rules payment could be made in  the Strand with the Transfer being available for submission to the Land Registry that day. While payment can be made at a Bank or electronically, the form must be submitted to Netherton before the requisite Certificate can be obtained.

Those practitioners not on the DX postal system will be penalised if the Royal Mail continues its present level of service. Not only will practitioners struggle to keep control of the requisite registration forms but increasing delays will result from the one-size-fits-all regime.

It appears that the Government has forced the Stamp Duty Office to introduce the new system before a number of problems have been resolved. There has also been a lack of consideration towards those involved within the profession. One example of this is the decision by the Revenue to send any Certificate to a buyer if Box 58 is not ticked and Box 61 of the Land Transaction Return completed, as might easily happen with an over-stressed secretary.

At a Stamp Duty conference run by The Law Society, the Stamp Duty Officers were unable to appreciate the concern expressed by many commercial property solicitors at their statement that Stamp Duty arises on all rent. They were unable to state concisely what the position was where contributions in respect of Insurance, or Service Charge are referred to as "rent" within a commercial lease. As commercial practitioners will appreciate, the inclusion of these liabilities within the definition of rent is to ensure other covenants in respect of forfeiture and obligations under the Lease can be enforced where non-payment occurs.

As a result of the vagueness of the Stamp Duty Officers at the Stamp Duty Land Tax conference discussion, Andrew Penfold of Ambrose Appelbe asked that a clear, concise and accurate article should be published in The Law Society Gazette during November. Many practitioners dealing with Commercial Property could see the importance of this. If the Stamp Duty Office is itself uncertain of the legislation and its impact on commercial leases, how can practitioners be expected to be confident of the position?

The Stamp Duty team of the Inland Revenue appear relaxed about the changes introduced on 1st December, but even they must be concerned at the haste at which it has been rushed through and at the number of issues which  remain unclear and to which they have struggled to provide answers. Time will tell, but at this stage one thing is for certain: Stamp Duty Land Tax is here for the long term and set to become an even more aggressive tax. No longer is it simply the family home that is penalised, but now also the shopkeeper who needs to renew his lease.

To speak to a lawyer about Stamp Duty Land Tax or related matters, telephone Felix Appelbe or Andrew Penfold on 020 7242 7000 or use the Contact Request Form.

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