Chapter 14 Stamp taxes Flashcards
1.1 Stamp Duty for purchase of own shares
Stamp duty is paid by the purchaser of shares from an existing shareholder when the purchase is accompanied by a stock transfer form.
When a company buys back its own shares, stamp duty is still due at 0.5% on the buyback itself, and payable by the company unless the transactions is a redemption of redeemable shares or is part of a court scheme of arrangement.
1.2 transfers between group companies
No stamp duty is charged on intra-group transfers of shares. A group for these purposes is a 75% group, the exemption still applies if one of the companies is non-UK resident.
1.3 Share for share relief.
No stamp duty is charged where shareholders swap shares in one company for newly issued shares in another, which is inserted above the original company as part of a corporate reconstruction. The shareholders in the acquiring company after the exchange must be the same as those in the original company. The treatment does not apply if at the time of exchange there are arrangements in place for a change in control of the acquiring company.
1.4 Transfers of securities to connected companies.
When listed shares are transferred to connected companies the stamp duty is the higher of the actual consideration and the market value of the securities transferred. Connected means two companies controlled by the same person and individuals are connected to a company they control.
This also applies to unlisted securities transferred to connected companies but only when there is a new issue of shares to act as full/partial consideration for the transfer.
2.1 Stamp duty reserve tax
If a purchase of shares take place without a stock transfer from the buyer pays stamp duty reserve tax rather than stamp duty. Same rules apply here for connected companies as normal stamp duty.
This is payable at 0.5% x consideration.
Group transfers qualifying for stamp duty relief are also exempt. This is collected automatically by stock brokers. If via CREST, payable by 14 days after trade. Otherwise, payable by 7th day of month following month agreement was made.
3.1 Stamp duty land tax
Chargeable on land transactions payable by the purchaser at the applicable rate times consideration. Stamp duty land tax is calculated on the VAT-inclusive price.
Rate on residential property is: 0.5% up to £125,000, 2.5% between £125,001 and £250,000, 5.5% between £250,001 and £925,000, 10.5% between £925,001 and £1,500,000 and 12.5% for over £1,500,001.
- There is first time buyers’ relief for properties up to £500,000, no SDLT payable on first £300,000 and then 5% on balance.
- From April 2021 an additional 2% is added to the relevant rates of SDLT where non-resident individuals and companies buy residential property.
- Where two or more transactions take place between the same buyer and seller, they are linked transactions for SLDT, and the total value of transactions are looked at.
On commercial property the rates are 0% up to £150,000, 2% between £150,001 and £250,000 and 5% for over £250,001.
If linked transactions involve both residential and commercial property, then commercial rates are used and the 2% surcharge for non-residents does not apply if commercial rates are used.
Exemptions from SDLT include gifts, transfers on divorce, variation of a will and between 75% group members (this ceases if arrangements exist at the time for the transferor and transferee companies to cease from the group, or if the transferee company leaves the group within 3 years of the transfer still holding the asset transferred).
- A land transaction form must be submitted by the purchaser within 14 days of the effective date (usually completion) and the SDLT paid by the same date.
- Interest may be charged if the duty is paid late – runs from the end of the 14-day period to the day before the duty is paid.
- If the land transaction form is submitted late there are penalties.
3.2 SDLT - additional residential property and rent.
3% is added to the rate of SDLT on the purchase of additional residential properties. This does not occur if the purchase is intended to be a replacement of the main residence. If charged it can be refunded provided the previous residence is sold within 3 years of the date of purchase of the replacement.
3% is added to the purchase of residential property by companies regardless of whether another property is owned unless the 15% rate of SDLT applies. The additional 3% also does not apply if the transaction is less than £40,000 or the purchase is of a lease not exceeding 21 years.
SDLT is payable on any premium in accordance with the normal rules. It is also payable on the total rents of the following:
% Residential Non-residential (includes mix use)
0 Up to £125,000 Up to £150,000
1 Excess over £125,000 £150,000 - £5m
2 n/a Excess over £5m
3.3 Stamp duty on incorporation or liquidation
On incorporation the assets of the unincorporated business will be transferred to a company. SDLT will be charged on the company on the transfer of any land or buildings on incorporation based on the MV on the transfer date. The percentage used will be based on the total value of the land transferred. SLDT is normally charged on the VAT inclusive price, but if the transfer qualifies as a TOGC for VAT purposes, the SDLT will be charged on the actual value of the land and buildings. There will be no stamp duty payable on the shares received on incorporation assuming they represent a new issue of shares.
No stamp duty is payable by shareholders who receive land and buildings on the liquidation of a company’s assets unless consideration is paid. Since the shares will normally be cancelled, no stamp duty will be payable on the shares either.
4.1 High value properties
A higher rate of stamp duty land tax at 15% applies where an interest in a single residential property is sold to a company, or a partnership where at least one partner is a company, or a collective investment scheme. This rule only applies if the interest is sold for consideration of more than £500,000.
The charge does not apply where the acquiring company is a property developer, and the property is acquired purely for the development and resale. Where a 15% rate of stamp duty does apply, the annual tax on enveloped dwellings is also likely to apply.
4.2 Annual tax on enveloped dwellings
The charge is based on the value of property at the later of April 2017 and the date the owner acquired interest. Revaluations are made every five years. The next revaluation is that in April 2022 and will apply from 2023/24. The relevant levels of annual charge are:
Property value 2022/23 annual charge 2021/22 annual
charge
Up to £500,000 n/a n/a
£500,001 to £1,000,000 £3,800 £3,700
£1,000,001 to £2,000,000 £7,700 £7,500
£2,000,001 to £5,000,000 £26,050 £25,300
£5,000,001 to £10,000,000 £60,900 £59,100
£10,000,001 to £20,000,000 £122,250 £118,600
£20,000,001 or more £244,750 £237,400
Exemptions can apply in particular to property development and investment businesses. ATED needs to be paid within 30 days of the beginning of the chargeable year (30 April).
