STAMP DUTY LAND TAX - THE NEW RULES

Cobbetts’ Tax Partner, Peter Townsend, explains the new SDLT disclosure rules which apply to SDLT saving arrangements on commercial property transactions.

The Government has introduced new rules to come into force on 1 August 2005 which require disclosure of tax planning arrangements that save stamp duty land tax (“SDLT”). The new rules are based on the existing tax scheme disclosure rules relating to employment and financial products and are contained in two new statutory instruments numbered 1868 and 1869. These deal respectively with the types of arrangement covered and the terms on which disclosure must be made.

The tax scheme disclosure rules are extremely complex and a full explanation would run to many pages therefore a brief summary of the new rules is outlined below.

When is an SDLT saving arrangement discloseable under the new rules?

• The new disclosure rules only affect proposals made available for implementation, or arrangements first entered into, on or after 1 August 2005. Essentially, it is only proposals made available on or after 1 August 2005 and arrangements entered into on or after that date that are potentially discloseable. However, a fresh proposal by a professional legal adviser, on or after 1 August 2005 of the same SDLT planning used before that date would be within the new rules, i.e. there is no “grandfathering” of proposals which are the same as any already made before 1 August 2005. 
• If the arrangements in principle are discloseable, then the primary obligation to disclose falls on the “promoter” (eg the legal adviser). However if a legal adviser is prevented from disclosing because legal professional privilege applies to the information and the client does not waive privilege, the disclosure obligation is transferred to the client as the “user” of the scheme.
• The new SDLT rules relate to schemes where:
  - An SDLT advantage might be expected to be a main benefit of the scheme;
  - The scheme does not relate solely to residential property;
  - The market value of the land is to £5m or more (or the  value is not known);
  - None of the exceptions from disclosure listed in the schedule to SI 2005 1868 apply.

Even if any of the exceptions listed in the above schedule apply a scheme is still discloseable if it contains an unlisted step which is necessary for achieving the SDLT advantage.

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