HC Deb 07 July 2004 vol 423 cc946-55

Amendments made: No. 166, in page 572, line 25, leave out 'an interest in land' and insert 'a chargeable interest'.

No. 167, in page 572, line 29, leave out 'an interest in land' and insert 'a chargeable interest'.

No. 168, in page 572, line 31, leave out 'an interest in land' and insert 'a chargeable interest'.

No. 169, in page 572, line 33, leave out 'an interest in land' and insert 'a chargeable interest'.

No. 170, in page 572, line 34, leave out 'an interest in land' and insert 'a chargeable interest'.

No. 171, in page 572, line 35, leave out 'an interest in land' and insert 'a chargeable interest'.

No. 172, in page 572, line 38, leave out 'an interest in land' and insert 'a chargeable interest'.

No. 173, in page 572, line 39, leave out 'an interest in land' and insert 'a chargeable interest'.

No. 174, in page 573, line 5, leave out 'an interest in land' and insert 'a chargeable interest'.

No. 175, in page 573, line 8, leave out from 'shall' to end of line 12 and insert— '(subject to paragraph 11B) be taken to be equal to—

(RCP x MV)+ (RCP x AC)

where— RCP is the relevant chargeable proportion,

MV is the market value of the interest transferred, and

AC is the actual consideration for the transaction.

(2A) The relevant chargeable proportion in relation to the market value of the interest transferred is—

(100-SLP)%

where SLP is the sum of the lower proportions.

(2B) The relevant chargeable proportion in relation to the actual consideration for the transaction is—

SLP%

where SLP is the sum of the lower proportions.

(2C) Paragraph 11A provides for determining the sum of the lower proportions.'.

No. 176, in page 573, line 13, leave out 'and (3)' and insert 'to (2C)'.

No. 177, in page 573, line 33, after second 'the' insert 'relevant'.

No. 178, in page 573, line 37, after second 'the' insert 'relevant'.

No. 179, in page 573, line 41, leave out from second 'to' to end of line 43 and insert—

(RCP x MV) + (RCP x AC)

where—

RCP is the relevant chargeable proportion,

MV is the market value of the interest transferred, and

AC is the actual chargeable consideration other than rent.'.

No. 180, in page 574, leave out lines 2 to 5 and insert—

RCP x MV

where—

RCP is the relevant chargeable proportion, and

MV is the market value of the interest transferred.'.

No. 181, in page 574, line 5, at end insert—

'(7) The relevant chargeable proportion in relation to—

  1. the net present value of the rent payable over the term of a lease, or
  2. the market value of the interest transferred, is—

(100—SLP)%

where SLP is the sum of the lower proportions.

(8) The relevant chargeable proportion in relation to the actual consideration other than rent is—

SLP%

where SLP is the sum of the lower proportions.

(9) Paragraph 11A provides for determining the sum of the lower proportions.

(10) This paragraph is subject to paragraph 11B.'.

No. 182, in page 574, line 5, at end insert—

'Transfer of chargeable interest to a partnership: sum of the lower proportions

11A (1) The sum of the lower proportions in relation to a transaction to which paragraph 10 applies is determined as follows:—

Step One

Identify the relevant owner or owners.

A person is a relevant owner if—

  1. (a) immediately before the transaction, he was entitled to a proportion of the chargeable interest, and
  2. (b) immediately after the transaction, he is a partner or connected with a partner.

Step Two

For each relevant owner, identify the corresponding partner or partners.

A person is a corresponding partner in relation to a relevant owner if, immediately after the transaction—

  1. he is a partner, and
  2. he is the relevant owner or is connected with the relevant owner.

Step Three

For each relevant owner, find the proportion of the chargeable interest to which he was entitled immediately before the transaction.

Apportion that proportion between any one or more of the relevant owner's corresponding partners.

Step Four

Find the lower proportion for each person who is a corresponding partner in relation to one or more relevant owners.

The lower proportion is—

  1. the proportion of the chargeable interest attributable to the partner, or
  2. if lower, the partner's partnership share immediately after the transaction.

The proportion of the chargeable interest attributable to the partner is—

  1. if he is a corresponding partner in relation to only one relevant owner, the proportion (if any) of the chargeable interest apportioned to him (at Step Three) in respect of that owner;
  2. if he is a corresponding partner in relation to more than one relevant owner, the sum of the proportions (if any) of the chargeable interest apportioned to him (at Step Three) in respect of each of those owners.

Step Five

Add together the lower proportions of each person who is a corresponding partner in relation to one or more relevant owners.

The result is the sum of the lower proportions.

(2) For the purposes of this paragraph persons who are entitled to a chargeable interest as beneficial joint tenants (or, in Scotland, as joint owners) shall be taken to be entitled to the chargeable interest as beneficial tenants in common (or, in Scotland, as owners in common) in equal shares.

Transfer of chargeable interest to a partnership consisting wholly of bodies corporate

11 B (1) This paragraph applies where—

  1. there is a transaction to which paragraph 10 applies;
  2. immediately after the transaction all the partners are bodies corporate;
  3. the sum of the lower proportions is 75 or more.

(2) Paragraphs 10 and 11 have effect with these modifications.

(3) In paragraph 10, for sub-paragraphs (2) to (2C) substitute—

"(2) The chargeable consideration for the transaction shall be taken to be equal to the market value of the interest transferred.".

(4) In paragraph 10(4), for "sub-paragraphs (2) to (2C)" substitute "sub-paragraph (2)".

(5) In paragraph 11, omit sub-paragraphs (3) and (7) to (9).

(6) In paragraph 11, for sub-paragraph (4) substitute—

"(4) If there is chargeable consideration other than rent, that chargeable consideration shall be taken to be equal to the market value of the interest transferred.".

(7) In paragraph 11, for sub-paragraph (5)(b) substitute

"(b) that chargeable consideration shall be taken to be equal to the market value of the interest transferred.".

(8) Paragraph 11A provides for determining the sum of the lower proportions.'.

No. 183, in page 574, leave out lines 7 to 11 and insert—

'12 (1) This paragraph applies where—

  1. there is a transfer of an interest in a partnership;
  2. consideration is given for the transfer;
  3. the relevant partnership property includes a chargeable interest.

(1A) The transfer—

  1. shall be taken for the purposes of this Part to be a land transaction;
  2. is a chargeable transaction.

(1B)'.

No. 184, in page 574, line 23, leave out 'interest in land' and insert 'chargeable interest'.

No. 185, in page 574, line 41, leave out 'three' and insert 'four'.

No. 186, in page 574, line 44, after 'no' insert 'chargeable'.

No. 187, in page 575, line 2, after 'any' insert 'chargeable'.

No. 188, in page 575, leave out lines 6 to 16 and insert—

'(4) The third condition is that—

  1. the term of the lease is 5 years or less, or
  2. if the term of the lease is more than 5 years—
    1. (i) the lease provides for the rent payable under it to be reviewed at least Once in every 5 years of the term, and
    2. (ii) the rent payable under the lease as a result of a review is required to be a market rent at the review date.

(4A) The fourth condition is that there has been no change to the lease since it was granted which is such that, immediately after the change has effect, the rent payable under the lease is less than a market rent.'.

No. 189, in page 575, line 36, have out 'an interest in land' and insert 'a chargeable interest'.

No. 190, in page 576, line 5, after 'transfer' insert '—

  1. shall be taken for the purposes of this Part to be a land transaction;
  2. '.

No. 191, in page 576, line 27, leave out 'an interest in land' and insert 'a chargeable interest'.

No. 192, in page 576, leave out lines 32 to 37.

No. 193, in page 576, line 38, leave out from 'shall' to end of line 41 and insert— '(subject to paragraph 17E) be taken to be equal to—

(RCP x MV) + (RCP x AC)

where—

RCP is the relevant chargeable proportion,

MV is the market value of the interest transferred, and

AC is the actual consideration for the transaction.

(3A) The relevant chargeable proportion in relation to the market value of the interest transferred is—

(100-SLP)%

where SLP is the sum of the lower proportions.

(3B) The relevant chargeable proportion in relation to the actual consideration for the transaction is—

SLP%

where SLP is the sum of the lower proportions.

(3C) Paragraph 17A provides for determining the sum of the lower proportions.'.

No. 194, in page 576, line 42, leave out 'subparagraph (3)' and insert 'sub-paragraphs (3) to (3C)'.

No. 195, in page 577, line 12, after second 'the' insert 'relevant'.

No. 196, in page 577, line 16, after second 'the' insert 'relevant'.

No. 197, in page 577, line 20, leave out from second 'to' to end of line 22 and insert—

'—

(RCP x MV)+ (RCP x AC)

where—

RCP is the relevant chargeable proportion,

MV is the market value of the interest transferred, and

AC is the actual chargeable consideration other than rent.'.

No. 198, in page 577, leave out lines 28 to 30 and insert—

'—

RCP x MV

where—

RCP is the relevant chargeable proportion, and

MV is the market value of the interest transferred.'.

No. 199, in page 577, line 30, at end insert—

'(7) The relevant chargeable proportion in relation to—

  1. the net present value of the rent payable over the term of a lease, or
  2. the market value of the interest transferred, is—

(100-SLP)%

where SLP is the sum of the lower proportions.

(8) The relevant chargeable proportion in relation to the actual consideration other than rent is—

SLP%

where SLP is the sum of the lower proportions.

(9) Paragraph 17A provides for determining the sum of the lower proportions.

(10) This paragraph is subject to paragraph 17E.'.

No. 200, in page 577, line 30, at end insert—

'Transfer of chargeable interest from a partnership: sum of the lower proportions

17A (1) The sum of the lower proportions in relation to a transaction to which paragraph 16 applies is determined as follows:—

Step One

Identify the relevant owner or owners.

A person is a relevant owner if—

  1. (a) immediately after the transaction, he is entitled to a proportion of the chargeable interest, and
  2. (b) immediately before the transaction, he was a partner or connected with a partner.

Step Two

For each relevant owner, identify the corresponding partner or partners.

A person is a corresponding partner in relation to a relevant owner if, immediately before the transaction—

  1. he was a partner, and
  2. he was the relevant owner or was connected with the relevant owner.

Step Three For each relevant owner, find the proportion of the chargeable interest to which he is entitled immediately after the transaction.

Apportion that proportion between any one or more of the relevant owner's corresponding partners.

Step Four Find the lower proportion for each person who is a corresponding partner in relation to one or more relevant owners.

The lower proportion is—

  1. the proportion of the chargeable interest attributable to the partner, or
  2. if lower, the partnership share attributable to the partner.

The proportion of the chargeable interest attributable to the partner is—

  1. if he is a corresponding partner in relation to only one relevant owner, the proportion (if any) of the chargeable interest apportioned to him (at Step Three) in respect of that owner;
  2. if he is a corresponding partner in relation to more than one relevant owner, the sum of the proportions (if any) of the chargeable interest apportioned to him (at Step Three) in respect of each of those owners.

Paragraph 17B provides for determining the partnership share attributable to the partner.

Step Five Add together the lower proportions of each person who is a corresponding partner in relation to one or more relevant owners.

The result is the sum of the lower proportions.

(2) For the purposes of this paragraph persons who are entitled to a chargeable interest as beneficial joint tenants (or, in Scotland, as joint owners) shall be taken to be entitled to the chargeable interest as beneficial tenants in common (or, in Scotland, as owners in common) in equal shares.

Transfer of chargeable interest from a partnership: partnership share attributable to partner

17B (1) This paragraph provides for determining the partnership share attributable to a partner for the purposes of paragraph 17A(1) (see Step Four).

(2) Paragraph 17C applies for determining the partnership share attributable to a partner where—

  1. the effective date of the transfer of the relevant chargeable interest to the partnership was before 20th October 2003, or
  2. the effective date of the transfer of the relevant chargeable interest to the partnership was on or after that date and—
    1. (i) the instrument by which the transfer was effected has been duly stamped with ad valorem stamp duty, or
    2. (ii) any tax payable in respect of the transfer has been duly paid under this Part.

(3) Where the effective date of the transfer of the relevant chargeable interest to the partnership was on or after 20th October 2003 but neither of the conditions in sub-paragraphs (i) and (ii) of sub-paragraph (2)(b) is met, the partnership share attributable to the partner is zero.

(4) The relevant chargeable interest is—

  1. the chargeable interest which ceases to be partnership property as a result of the transaction to which paragraph 16 applies, or
  2. where the transaction to which paragraph 16 applies is the grant or creation of a chargeable interest, the chargeable interest out of which that interest is granted or created.

17C (1) Where this paragraph applies, the partnership share attributable to the partner is determined as follows:—

Step One

Find the partner's actual partnership share on the relevant date.

In a case falling within paragraph 17B(2)(a), the relevant date—

  1. if the partner was a partner on 19th October 2003, is that date;
  2. if the partner became a partner after that date, is the date on which he became a partner.

In a case falling within paragraph 17B(2)(b), the relevant date—

  1. if the partner was a partner on the effective date of the transfer of the relevant chargeable interest to the partnership, is that date;
  2. if the partner became a partner after that date, is the date on which he became a partner.

Step Two

Add to that partnership share any increases in the partner's partnership share which—

  1. occur in the period starting on the day after the relevant date and ending immediately before the transaction to which paragraph 16 applies, and
  2. count for this purpose.

The result is the increased partnership share.

An increase counts for the purpose of paragraph (b) only if—

  1. (i) where the transfer which resulted in the increase took place on or before the date on which the Finance Act 2004 was passed, the instrument by which the transfer was effected has been duly stamped with ad valorem stamp duty under the enactments relating to stamp duty;
  2. (b) where the transfer which resulted in the increase took place after that date, any tax payable in respect of the transfer has been duly paid under this Part.

Step Three

Deduct from the increased partnership share any decreases in the partner's partnership share which occur in the period starting on the day after the relevant date and ending immediately before the transaction to which paragraph 16 applies.

The result is the partnership share attributable to the partner.

(2) If the effect of applying Step Three would be to reduce the partnership share attributable to the partner below zero, the partnership share attributable to the partner is zero.

(3) In a case falling within paragraph 17B(2)(a), if the partner ceased to be a partner before 19th October 2003, the partnership share attributable to the partner is zero.

(4) In a case falling within paragraph 17B(2)(b), if the partner ceased to be a partner before the effective date of the transfer of the relevant chargeable interest to the partnership, the partnership share attributable to the partner is zero.

(5) Paragraph 17B(4) (relevant chargeable interest) applies for the purposes of this paragraph.

Transfer of chargeable interest from a partnership to a partnership

17D (1) This paragraph applies where—

  1. there is a tram fer of a chargeable interest from a partnership to a partnership, and
  2. the transfer is both—
    1. (i) a transaction to which paragraph 10 applies, and
    2. (ii) a transaction to which paragraph 16 applies.

(2) Where none of the chargeable consideration for the transaction is rent—

  1. paragraphs 10(2) to (2C) a ad 16(3) to (3C) do not apply;
  2. the chargeable consideration for the transaction shall be taken to be what it would have been if paragraph 10(2) to (2C) had applied or, if greater, what it would have been if paragraph 16(3) to (3C) had applied.

(3) Where the whole or part of the chargeable consideration for the transaction is rent—

  1. paragraphs 11 and 17 do no: apply;
  2. the chargeable consideration for the transaction shall be taken to be what it would have been if paragraph 11 had applied or, if greater, what it would have been if paragraph 17 had applied.

Transfer of chargeable interest from a partnership consisting wholly of bodies corporate

17E (1) This paragraph applies where—

  1. there is a transaction to which paragraph 16 applies;
  2. immediately before the transaction all the partners are bodies corporate;
  3. the sum of the lower proportions is 75 or more.

(2) Paragraphs 16, 17 and 17D have effect with these modifications.

(3) In paragraph 16, for sub-paragraphs (3) to (3C) substitute—

"(3) The chargeable consideration for the transaction shall be taken to be equal to the market value of the interest transferred.".

(4) In paragraph 16(4), for "sub-paragraphs (3) to (3C)" substitute "sub-paragraph (3)".

(5) In paragraph 17, omit sub-paragraphs (3) and (7) to (9).

(6) In paragraph 17, for sub-paragraph (4) substitute—

"(4) If there is chargeable consideration other than rent, that chargeable consideration shall be taken to be equal to the market value of the interest transferred.".

(7) In paragraph 17, for sub-paragraph (5)(b) substitute—

(b) that chargeable consideration shall be taken to be equal to the market value of the interest transferred.".

(8) In paragraph 17D(2)—

  1. for "paragraphs 10(2) to (2C) and 16(3) to (3C)" substitute "paragraphs 10(2) and 16(3)";
  2. for "paragraph 10(2) to (2C)" substitute "paragraph 10(2)";
  3. for "paragraph 16(3) to (3C)" substitute "paragraph 16(3)".

(9) Paragraph 17A provides for determining the sum of the lower proportions.'.

No. 201, in page 577, line 31, leave out from beginning to end of line 21 on page 579.

No. 202, in page 579. line 26, after 'But' insert

'(subject to paragraphs 20A to 20C)'.

No. 203, in page 579, line 27,.it end insert–

'Application of disadvantaged areas relief

20A (1) Schedule 6 (disadvantaged areas relief) applies to the transfer of an interest in a partnership that is a chargeable transaction by virtue of paragraph 12 or 15 with these modifications.

(2) For paragraph 3 substitute—

"3 (1) This Part of this Schedule applies to a transfer of an interest in a partnership that is a chargeable transaction by virtue of paragraph 12 of Schedule 15 if every chargeable interest comprising the relevant partnership property is a chargeable interest in relation to land that is wholly situated in a disadvantaged area.

(2) This Part of this Schedule applies to a transfer of an interest in a partnership that is a chargeable transaction by virtue of paragraph 15 of Schedule 15 if the subject matter of the land transfer is a chargeable interest in relation to land that is wholly situated in a disadvantaged area.".

(3) In paragraph 5, for sub-paragraphs (2) to (4) substitute—

"(2) If the relevant consideration does not exceed £150,000 the transaction is exempt from charge.".

(4) For paragraph 6 substitute—

"6 (1) This paragraph applies where the land is partly non-residential property and partly residential property.

(2) The non-residential proportion of the chargeable consideration for the transaction does not count as chargeable consideration.

(3) The non-residential proportion is the proportion of the market value of the relevant property that, on a just and reasonable apportionment, is attributable to land that is nonresidential property.

(4) If the relevant consideration does not exceed £150,000, none of the residential proportion of the chargeable consideration counts as chargeable consideration.

(5) The residential proportion is the proportion of the market value of the relevant property that, on a just and reasonable apportionment, is attributable to land that is residential property.".

(5) For paragraph 7 substitute—

"7 (1) This Part of this Schedule applies to a transfer of an interest in a partnership that is a chargeable transaction by virtue of paragraph 12 of Schedule 15 if—

  1. some (but not all) of the chargeable interests comprising the relevant partnership property are chargeable interests in relation to land that is wholly situated in a disadvantaged area, or
  2. any chargeable interest comprised in the relevant partnership property is a chargeable interest in relation to land that is partly situated in a disadvantaged area and partly situated outside such an area.

(2) This Part of this Schedule applies to a transfer of an interest in a partnership that is a chargeable transaction by virtue of paragraph 15 of Schedule 15 if the subject matter of the land transfer is a chargeable interest in relation to land that is partly situated in a disadvantaged area and partly situated outside such an area.

(3) In this Part—

  1. references to the disadvantaged-area proportion are to the proportion of the market value of the relevant property that, on a just and reasonable apportionment, is attributable to land situated in a disadvantaged area;
  2. references to the advantaged-area proportion are to the proportion of the market value of the relevant property that, on a just and reasonable apportionment, is attributable to land that is situated outside a disadvantaged area.".

(6) In paragraph 8, for "consideration attributable to the land situated in the disadvantaged area" substitute "disadvantaged-area proportion of the chargeable consideration".

(7) In paragraph 9, for sub-paragraphs (2) to (4) substitute—

"(2) If the relevant consideration does not exceed £150,000 none of the disadvantaged-area proportion of the chargeable consideration counts as chargeable consideration.".

(8) For paragraph 10 substitute—

"10 (1) This paragraph applies where the land situated in a disadvantaged area is partly non-residential property and partly residential property.

(2) The non-residential proportion of the disadvantaged-area proportion of the chargeable consideration for the transaction does not count as chargeable consideration.

(3) The non-residential proportion is the proportion of the disadvantaged-area proportion of the market value of the relevant property that, on a just and reasonable apportionment, is attributable to land that is not residential property.

(4) If the relevant consideration does not exceed £150,000, none of the residential proportion of the disadvantaged-area proportion of the chargeable consideration counts as chargeable consideration.

(5) The residential proportion is the proportion of the disadvantaged-area proportion of the market value of the relevant property that, on a just and reasonable apportionment, is attributable to land that is residential property.".

(9) After paragraph 11(1) insert—

"(1A) In this Schedule—

"the land transfer" means the transaction that is the land transfer for the purposes of paragraph 15 of Schedule 15;

"the relevant partnership property" has the meaning given by paragraph 12(3) of Schedule 15;

"the relevant property"—

  1. in the case of a transfer of an interest in a partnership that is a chargeable transaction by virtue of paragraph 12 of Schedule 15, means the relevant partnership property;
  2. in the case of a transfer of an interest in a partnership that is a chargeable transaction by virtue of paragraph 15 of Schedule 15, means the subject matter of the land transfer.

(1B) There is a transfer of an interest in a partnership for the purposes of this Schedule if there is such a transfer for the purposes of Part 3 of Schedule 15 (see paragraph 27 of that Schedule).".

(10) Omit paragraphs 11(2) and 12.