Module 11 Stamp Taxes

Question 1

What is stamp taxes?

Answer 1

These are taxes levied on transactions involving property and shares

Indirect taxes paid on the purchase of certain assets (both individuals and companies can be subject to these taxes)

Question 2

What are the three categories of stamp taxes?

Answer 2

Stamp duty,
Stamp duty Reserve Tax (SDRT)
Land taxes - Stamp Duty Land Tax SDLT (England and Wales) / Land and Buildings Transaction Tax LBTT (Scotland) / Land Trasction Tax LTT (Wales)

Question 3

who’s responsibility is stamp duty?

Answer 3

Stamp duty is the purchaser liability and it is always rounded up to the nearest £5.

Question 4

Is stamp duty chargeable on transactions below £1000?

Answer 4

No - < £1000 gives less than £5 charge

No stamp duty is payable in the below situtations:

A transfer of shares between trustees on changes of composition of trustee or shares transferred to a trust

Lifetime gift of shares

Transfer of shares on marriage/partnership

Transfer of shares in a divorce or dissolution of a civil partnership agreement

Transfer of shares left in a will

Question 5

What happens for stamp duty if the full consideration is not known?

Answer 5

If the actual consideration is not known but a minimum or maximum value is set by the contract, then the 0.5% will apply to the figure.

If both minimum and maximum is presented, then it is MAXIMUM that will be taxed.

No additional payments will be due and no repayment will be made based on the final figures paid

Question 6

What is the procedure of administrating stamp duty?

Answer 6

Transfer of shares - A stock transfer form will be needed showing the detail of transferor, transferee, amount of consideration and whether the transfer is exempt from stamp duty.

Form needs to be sent to Stamp office within 30 days of it being executed, late stamping and late payment attract interest and penalties.

Question 7

What are the penalty if the transfer document is presented late?

Answer 7

If it is not presented within one year after the 30 day due date, a maximum penalty of the LOWER of £300 or the amount of unpaid duty will be payable

If it is after the one year period after the 30 days due date then the penalty is the higher of £300 or the amount of unpaid stamp duty.

HMRC can adjust accordingly.

There is also interest on late payment up to the day the stamp duty is paid. Interest is based on amount unpaid and how late the payment is.

Question 8

What is the penalty for fraudulent reutnr of a transfer form?

Answer 8

Penalties of up to £3000 are chargeable

Question 9

What is Stamp duty reserve tax SDRT?

Answer 9

Designed to charge duty on paperless share transactions

Electronic share transactions are carried out using the CREST electronic settlement system and passed to HMRC via an electronic link

SDRT is charged at the same rate as stamp duty but it is not rounded up or down.

Question 10

What does land tax (Stamp duty land tax/ Land and buildings Transaction Tax / Land transaction Tax) affect?

Answer 10

The purchase/sale of land or property and the grant or assignment (assignation in Scotland) of a lease.

This applies to individuals and companies

Question 11

What are the two categories for Land Tax?

Answer 11

The tax band/rate is determined on whether the property/land is residential or non-residential, if it is mixed usage then it will be considered as non residential

Land Tax is always rounded down to the nearest pound

Question 12

What happens if someone purchases additional residential property?

Answer 12

They are liable for an additional 3% (England and Wales) or 4% (Scotland) of land tax on the total value of property (only if £40,000 or more)

Couples are treated as one entity so the rule still apply

Question 13

Land tax on the consideration - rules?

Answer 13

Tax is due on the consideration paid for the property (Money or money’s worth)

If non cash considerations are used (assets / taking on debt) then their value will be added onto the consideration.

The consideration includes VAT chargeable on property at 20%.

If parts of the consideration is deferred or dependent on future events / estimates etc, for tax purposes, it is still included total consideration.

Question 14

What are the rules regarding assignment/assignation of a lease?

Answer 14

The one single capital sum paid for the assignment/assignation of lease is still liable to land tax and the rate depends on if it is residential or non residential

Question 15

What is the tax rule for grants of a lease?

Answer 15

Land tax is due on the lease premium (lump sum paid for lease) - calculated rate depends on residential or non residential

The future rental is also taxed based on the NPV.

Question 16

Rules on SDLT administration?

Answer 16

Land transaction return must be completed online or paper and returned to HMRC within 14 days of th effective date of the transaction (generally the purchase date)

HMRC will then issue a certificate if:

Return is correctly completed
Relevant supporting information included
Calculation of SDLT is correct
Correct payment has been made

Without the certificate, the transaction cannot be entered into the records of land registry.

Records of transaction should be kept for 6 years, penalty of up to £3000 can be charged for failing to do so.

Fraudulent evasion of SDLT can led to 7 years in jail and/or a fine.

Question 17

What is the administration rules on LBTT

Answer 17

Revenue Scotland is responsible for this, non of the HMRC administration or penalty apply to LBTT

An LBTT return must be submitted and payment of tax made before title of the land can be registered with the keeper of registers of Scotland. Deadline is within 30 days of the effective date of transaction.

Tax payable is paid at the same time as the LBTT return is submitted

Question 18

What is the administration rules on LTT

Answer 18

Welsh Revenue Authority deals with the administration of LTT

LTT return must be submitted within 30 days of the effective date of transaction, tax is due along with the LTT return.