Stamp Duty Land Tax On 1st December 2003 Stamp Duty was replaced by Stamp Duty Land Tax (SDLT) for all transactions involving the purchase and sale of land and buildings. Stamp Duty remains for such things as transfers of shares. Technically Stamp Duty was a tax on documents, which means that the Disposition or other conveyance in favour of the purchaser of land had stamps impressed upon it for the value of the duty payable. You could not register a title without those stamps being on the document if the price was above the level at which stamp duty started to become payable. However, it was not compulsory to stamp a document if you did not need to register it and if you did not think that you would ever need to found upon it in Court. SDLT, however, is a tax on the transaction itself, and is compulsory. Under SDLT the title deed is not stamped, but instead the purchaser's solicitor sends off to the Inland Revenue a new type of Tax Return called a Land Transaction Return (Form SDLT1), which runs to six pages and gives the Inland Revenue full details of the transaction including the price, details of the property, the date of entry, details about the seller, and details about the purchaser including his name, address and National Insurance Number. The Return has to be signed by the purchaser personally, not by his solicitor, and payment of the Tax due (on a self-assessed basis) is sent to the Inland Revenue along with the Return. The Inland Revenue have set up a new processing centre near Liverpool to deal with SDLT, and on receipt they immediately scan the Return and issue a Land Transaction Return Certificate which is then submitted to the Land Register along with the conveyance. If the Inland Revenue decide to carry out a check on the Return, they have a period of nine months within which to make their investigations. There is no change in the rates of duty payable on residential property - as soon as you go above £60,000 tax is payable at 1%, as soon as you go above £250,000 it is 3%, and as soon as you go above £500,000 it is 4%. However, a change in rates has been brought in for commercial property, where the 1% band starts not at £60,000 but at £150,000. There are also substantial changes in the rates of tax payable on leases. Previously under Stamp Duty the amount of duty payable was based on the annual rent (including where appropriate VAT) and on any premium payable on top. SDLT, however, when applied to leases is be based on the Net Present Value (NPV), which is a complicated calculation, but in essence is based on the total rent payable over the term of the lease but subject to a compound discount. The threshold for leases of commercial property is an NPV of £150,000. This means that at the lower end of the scale some leases which used to be chargeable to Stamp Duty now pay nothing. For example, a 15-year lease at an annual rent (excluding VAT) of £10,000 used to be charged Stamp Duty of £235, but the transaction is now below the SDLT threshold. At the other end, however, the tax payable is markedly increased. For example, a 20-year lease at an annual rent (excluding VAT) of £25,000 used to be charged Stamp Duty of £590, but the transaction is now chargeable to SDLT of £4,175. We will be happy to provide further information on this topic on request. The other big difference between Stamp Duty and SDLT is that all transactions involving the purchase or sale of land for a consideration must be reported on a Land Transaction Return, whether or not Tax is actually payable. For example, the purchase of a flat for £50,000 is below the £60,000 threshold, and did not need to be sent to the Stamp Office at all. Under SDLT a form needs to be completed, signed and returned to the Inland Revenue in exchange for a Return Certificate. The only time when a Return need not be completed is where the transaction is exempt because, for example, it is a gift. For further information on the foregoing please contact one of our Property partners. 26-Nov-03 @ 16:10