Finance Bill : Stamp Duty 1

Clause 113 of the Finance Bill provides that instruments (eg conveyances, transfers and leases) executed on or after 28th March 2000 will attract the higher rates of duty announced in the Budget on 21st March 2000. However, the old rates will apply where the instrument gives effect to a contract made on or before 21st March2000.

Probably as a result of the Revenues defeat in the Swallow Hotels case Clause 113 restricts the circumstances in which the old rates can apply to instruments executed on or after 28th March 2000 (when compared to the transitional rules contained in prevoius Finance Bills introduced by this Government). In Swallow Hotels the taxpayer was granted a lease in 1992 which contained an option to take a further lease which was exercised after an increase in the rates of stamp duty. The High Court held that the new lease attracted the old rates because it had been "executed in pursuance of a contract made on or before [Budget Day]."

Surprisingly the court held that the option in the circumstances should be regarded as a contract to take the lease. The Revenue have lodged an appeal but may decide not to pursue it in the light of Clause 113. Clause 113 prevents instruments executed on or after 21st March 2000 from attracting the old rates where:

1. it is made pursuant to an option EXERCISED on or after 21st March 2000.

2. the contract has been ASSIGNED on or after 21st March 2000

3. it completes a sub-sale and the sub-sale contract was entered into on or after 21st March 2000

Clause 113 has passed the Commitee stage in the House of Commons and will now almost certainly be passed into law in its current form.

For further information on this topic please contact Mike Boutell at [email protected] or on (+44) (0)20 7367 3000.