STAMP DUTY IS DEAD - LONG LIVE SDLT!

From Monday 1 December 2003 the rules and administrative procedures regulating the payment of Stamp Duty on all property transactions is to be overhauled with Stamp Duty being abolished and replaced by a new tax - Stamp Duty Land Tax ("SDLT").

The following brief points should be noted:-

1. Land documents will no longer be stamped and instead a self assessment Inland Revenue Form will need to be completed on each transaction and forwarded to the Inland Revenue with the tax payment. Once processed, a certificate will be issued. Late submission of that form will result in penalties and interest being charged.
   
   
2. Under the new legislation the rates of SDLT will be the same as were payable under Stamp Duty. However the potential tax liability for leases will change appreciably.
   
   
3. In relation to leases, the tenant's liability to SDLT under the new rules will in most cases be higher than Stamp Duty under the existing regime. In some cases the liability will be significantly higher.
   
   SDLT on new commercial leases will be equal to 1% of the Net Present Value ("NPV") of the rent payable under the Lease for the full term of that Lease. NPV will be calculated by discounting future rents at 3.5% per annum.
   
   No duty will be payable if the NPV is £150,000 or less and VAT will be excluded from the calculation unless the landlord has already elected to charge VAT before the lease is granted.
   
   
4. Most reliefs (where applicable) currently available from Stamp Duty will continue under the new rules. However, the conditions that need to be satisfied for such a "relief" may change as the Revenue takes an increasingly robust line against tax avoidance schemes.

Andrew Woods
Partner

4 December 2003