|
|
Stamp Duty splits
Stamp Duty has for years been charged on transfers of property that are legally given effect by a document - mainly, but not exclusively, sales of shares and sales of land. Many of the rules date from 1890, and the system has looked increasingly creaky. Finally, the Government has decided to rewrite the tax completely, and from 1 December 2003 we have two different charges instead of one: Stamp Duty, which will be charged on share deals, and Stamp Duty Land Tax, which will be charged on land, including the grant of leases.
The basic idea of SDLT is that it replaces the old Stamp Duty charge on property transactions, but there are some important changes in charging the tax. The most significant is a big change to the grant of a new lease - not an assignment, where the seller gets rid of the land completely, but the situation where the grantor of the lease will receive rent, and will get the property back at the end of the term. The rent has always been chargeable to Stamp Duty, but the calculation is being completely rewritten for
SDLT, and in most cases will give rise to a much higher tax charge.
If you are thinking of granting or taking on a new lease in the near future, be aware that the tax cost is about to go up. Unfortunately, the change will also catch contracts entered into after July, unless they are completed before 1 December, so you'll have to hurry to beat the increase.
|
The big change to the granting of leases is that the Stamp Duty Land Tax charge will be 1% of the net present value of the total rent under the lease, instead of a percentage of one year's rent (at the moment, 1% if the lease is up to 7 years long, 2% for 7 - 35 years, 12% for 35 - 100 years, and 24% over that). Although the total rents will be discounted, it is obvious that there will be a significant increase in the charge for most lengths of lease.
|
|
