Stamp duty

Goodwill and debts
To mirror the corporation tax reforms that give deductions for the cost of goodwill on the purchase of a business, there will also be an exemption from stamp duty with effect from 23 April 2002. From late 2003, transfers of debt will also be exempted, to facilitate business sales and help companies raise finance through debt factoring.

These are again significant measures affecting the cost of incorporating a business, where goodwill can be one of the main assets transferred.

Anti-avoidance
The 2002 Finance Bill will introduce a number of measures to counter well-known avoidance schemes that exploit weaknesses in the stamp duty legislation and its enforcement powers:

· claw-back of relief where transfers have taken place within a group or an undertaking has been acquired in exchange for shares, if the company that has benefited from the relief leaves the group or changes ownership within two years;

· extension of the 30-day penalty for the late stamping of documents to those executed outside the UK in respect of UK land or buildings; and

· for transactions with a market value in excess of £10 million bringing the contract for sale (rather than the conveyance) into charge. This will stop the practice of "resting on contract" for these high-value transactions.

Disadvantaged communities
From 30 November 2001, all property transactions, subject to a limit of £150,000 on the consideration or lease premium, have been exempt from stamp duty if the property is situated in a designated disadvantaged community (full details of these areas can be found on the Stamp Office website at www.inlandrevenue.gov.uk/so/disadvantaged.htm).

At a date to be announced, and subject to EU approval, all non-residential property in those areas will enjoy complete stamp duty exemption. The purchase of six or more separate dwellings, and certain low-rental leases, will enjoy the same relief, to encourage institutional landlords to invest in those areas.

Extensive consultation has taken place on the definition of residential property for this purpose, with full details to be published in the Finance Bill.

Modernisation of stamp duty
Consultation will take place on the general modernisation of stamp duty, with a view to introducing reforms in the Finance Bill 2003. This will include the introduction of paperless electronic conveyancing and measures to charge the transfer of shares or interests in property "special purpose vehicles" to the same duty as would have been payable on the underlying land and buildings.

There will be a reform of duty on leases, but no general change in the stamp duty and samp duty reserve tax treatment of shares.

It is not proposed that the "slab" system of stamp duty rates, whereby the rate applies to the whole of the consideration if the figure is above the relevant threshold, will change.