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Stamp Duty

Volume 406: debated on Tuesday 3 June 2003

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To ask the Chancellor of the Exchequer how much additional duty he estimates will be raised from the proposal to change stamp duty on leases in each of the next five years; how many additional property transactions he estimates will come within the provision in each of the next five years; and what estimate he has made of (a) the compliance cost and (b) the number of additional staff required to implement the measures in each of the next five years. [115847]

The estimated additional duty from the proposed reform of lease duty was published in table A2.1 of the Budget report.Under the proposals, the revised charge on leases will value the rent payable over the term of the lease at its net present value (NPV) and there will be a single rate of 1 per cent. of the NPV of rental payments, where the NPV exceeds the zero rate band threshold of £60,000 (for residential property) or £150,000 (for nonresidential property).

As a result of the introduction of zero rate thresholds it is expected that, in fact, fewer transactions will be within the scope of the charge once stamp duty land tax is introduced than are currently within the scope of charge. It is estimated that over 90 per cent. of residential leases and around 60 per cent. of commercial leases will be exempt from lease duty.

Estimates of compliance costs, and other implementation costs, will be included in a full Regulatory Impact Assessment which will be published when stamp duty land tax is implemented.

It is not anticipated that the number of staff in the Stamp Office will increase as a result of the proposed reform of lease duty.

To ask the Chancellor of the Exchequer how the amount of stamp duty will be calculated in the sale of long leasehold residential property. [R] [115913]

Where a person who owns a residential property on a long lease sells that property, stamp duty is due on the amount paid for the assignment of the lease at the following rates:

Amount paidRate

(percentage)
Not exceeding £60,0000
More than £60,000 but not exceeding £250,0001
More than £250,000 but not exceeding £500,0003
More than £500,0004
This is subject to the availability of reliefs (such as that for purchases in disadvantaged areas).Where a new long lease is granted on a residential property rather than the existing lease being assigned, a premium is normally paid. This will be charged at the above rates except where rent of more than £600 is also payable, in which case any premium not exceeding £250,000 is charged at 1 per cent.Duty on rents payable under new leases is currently charged at between 1 per cent. and 24 per cent. of annual rent, depending on the length of the lease.A different lease duty structure is proposed in the current Finance Bill for the rental element of leases under stamp duty land tax. This will not affect the charge on new lease premiums or on the assignment of existing leases.

To ask the Chancellor of the Exchequer if he will make regulations under clause 50 of the Finance Bill to ensure that enhanced stamp duty is not paid on account of VAT increasing the consideration amount. [R] [115920]

Paragraph 2 of schedule 4 of the Finance Bill sets out the Government"s position on whether VAT should be included as consideration for the purposes of stamp duty land tax.Where VAT is actually paid then it should be treated as consideration. Broadly, where VAT is not charged at the time the transaction takes place, but there is a possibility that it might be charged at a later stage, then VAT will not count as consideration.

This is particularly relevant for the grant of new leases. Where an election to charge VAT has been made before the effective date for the lease, lease duty will be charged on the VAT element of the lease rent. But where such an election has not been made, no such charge will apply even if an election is made later. This is a relaxation of the position under the current stamp duty regime where consideration is treated as including VAT unless the lease specifically prohibits it being charged, regardless of whether an election has in fact been made. The Government do not intend to make regulations to alter the position described above.