SDLT and Investment Property

1. SDLTand Investment Property Patrick Cannon, 15 Old Square www.patrickcannon.net

2. Old ‘Split Title’ Structures • Re-uniting legal and beneficial interests • What to do? • Use of SDLT 60 self-certificates Beneficial Owner Nominee Company Whiteacre Legal title

3. Partnerships • A and B set up a partnership. A contributes land worth £10m, B contributes £5m cash and the £5m is repaid to A so that both partners have contributed a net £5m. • How does new para 17A, Sch 15 FA 2003 apply? – withdrawal of money within 3 years of contribution of land

4. Para 17A problem on way in B puts in cash £5m A puts in land £10m £5m out Partnership Tax on 50% of £10m + 50% of £5m under para 10 + £5m under 17A?

5. Para 17A problem on way out B puts in remaining £5m and takes land out A takes out remaining £5m £5m cash in and £10m land out £balance of £5m cash out Partnership Tax on 50% of £10m + 50% of £5m under para 18 + £5m under 17A?

6. Sub Sales £100 B A £150 C

7. Sub-Sales and Development Scenarios • Agreement for leases in development agreements • When lease is granted? Overlap credit for rent but what about the premium? • What if developer nominates an investor to take grant of formal lease? SDLT x 3? • Vendor/builder agreements • Purchaser/builder agreements

8. Leases and development scenarios Agreement for lease Freeholder Developer Cash Formal lease Cash Occupier

9. Overage Issues • Pay tax upfront and then adjust within 30 days of overage event • ‘Contingent’ – assume payable • ‘Uncertain’ – use reasonable estimate • ‘Unascertained’ – reasonable estimate • Deferment of tax • Can you discount for likelihood of payment? • Continuing legal liability for overage on disposal of the land

10. Group Relief Mini-GAAR • New sub-para (4A) of para 2 Sch 7: Group relief not allowed if transaction– • Not bona fide commercial reasons, or • Forms part of arrangements where a main purpose is the avoidance of liability to tax How much of a threat is this really? Possible ‘White List’?

11. SDLT problems with chattels • Box 1 of SDLT 4 v2 asks you to state the consideration apportioned to ‘chattels’ on a business sale • How to value chattels? Auction room; Special purchaser; Retail? • Enquiries about sales at or just under the threshold points: £60k, £250k and £500k • Goodwill – inherent or moveable? Morvic Pty Ltd v Commissioner of State Revenue (Vic) (2002)

12. Certificates of Value v Linked Transactions • ‘Larger transaction or series of transactions’: Stamp Duty • ‘Single scheme, arrangement or series of transactions’: SDLT • Classic 5 houses at £120,000 each? • Box 13 on form SDLT 1 • Are non-land transactions ‘linked transactions’? Building agreements? • Buy to let investors and agencies problem

13. Disclosure and SDLT Returns • HMRC enquiries in SDLT • Langham v Veltema • SP 1/06 • Sale retentions?

14. SDLT Scheme Disclosure (1) • From 1 August 2005 for commercial property of £5m or above • Arrangements enabling an SDLT advantage • No reference number procedure • No premium fee or confidentiality filters • Time limits

15. SDLT Scheme Disclosure (2) • No ‘White List’ • The Excluded Arrangements • The Listed Steps A to F • Rules 1 and 2 • Inclusion of unlisted step

16. SDLTand Investment Property Patrick Cannon, 15 Old Square www.patrickcannon.net