Clause 54 - Exceptions from deemed market value rule

Finance Bill – in a Public Bill Committee at 10:30 am on 5th June 2003.

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Question proposed, That the clause stand part of the Bill.

Photo of Mark Prisk Mark Prisk Shadow Paymaster General

The clause is about providing exemptions to clause 53. I have received several representations, predominantly from the legal profession, but I shall highlight just three. I am grateful to Charles Elphick of Reed Smith, the British

Property Federation and the Law Society for giving me background on the matter.

Could the Chief Secretary explain why bare trustees or nominee companies are absent from the exemptions? That is an important change in established law for such organisations. Could he define ''immediately'' in subsections (2) and (3)? I am not trying to engage in word play, but immediately is stretchable. Perhaps he could set some limit on it or explain why he has no wish to set a limit.

Lastly, subsection (4) states:

''Case 3 is where—

(a) the vendor is a company and the transaction is, or is part of, a distribution of the assets of that company (whether or not in connection with its winding up)''.

Could the Chief Secretary identify the circumstances in which the distribution of assets is not exempt?

Photo of Mr Paul Boateng Mr Paul Boateng Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

Essentially, I am asked why case 4 has not been brought into SDLT. It is suggested that this would mean that the distribution out of a settlement would be charged SDLT at market value. My response is that there would be a charge based on market value only if the beneficiary who receives land is a company. The exception previously contained in case 4 could, and might well be, used to avoid the correct level of SDLT. If it was possible to transfer land into a settlement in favour of a corporate beneficiary, no SDLT would be charged on the transfer and settlement, and, if there was no consideration for the transfer, the exception could be used to transfer the land out of the settlement to a corporate beneficiary without SDLT being paid. That clear abuse of the rules would enable land to be passed through a settlement to a company without a charge to SDLT.

By removing the exception, the SDLT rules close the loophole. It does not affect the transfer of land to a company acting as a nominee or a bare trustee for an individual. In that case, it would be the individual who is the purchaser, so the market value would not apply. I hope that that reassures those who raised the matter.

The exceptions in relation to nominees have been removed, because the exception in case 1 of the old stamp duty is no longer required as there is no charge to SDLT when a nominee transfers title to the person for whom they act. Cases 2 and 3 are also no longer required, because they were introduced to ensure that there was no market value charge when title was transferred to a nominee by a person they act for or between nominees. In such cases, the market value of a title will be minimal, and that goes back to a point made by the hon. Member for Torridge and West Devon. In all normal cases the market value will be below the SDLT threshold. When beneficial ownership and not just title is transferred to the nominee by the person they act for, it will be the same as any other transfer of interest in land, and there is no reason why the market value should not apply.

On the distribution of assets on a winding up, if the land was subject to a group relief claim in the three years preceding the distribution, it would not be exempt. That is one example but others may have

occurred to right hon. and hon. Members. With those explanations, I hope that we can now move on.

Question put and agreed to.

Clause 54 ordered to stand part of the Bill.