finance bill 2002: EXPLANATORY NOTE
CLAUSE 109 AND SCHEDULE 34: WITHDRAWAL OF GROUP RELIEF
SUMMARY
1. This clause and schedule provide for group relief to be withdrawn where there is a claim to the relief on an instrument which transfers land, and the transferee company leaves the group within two years of the execution of that instrument. The clause takes effect for instruments executed after 23 April 2002.
DETAILS OF THE CLAUSE
2. Subsection (1) applies the section where there has been an intra-group transfer of land on which group relief has been claimed, the transferee company ceases to be a member of the same group as the transferor company within two years of the transfer, and the transferee company still holds that land or a derivation of that land.
3. Subsection (2) states that group relief or an appropriate proportion of it is withdrawn, and a charge is imposed equivalent to the amount of stamp duty that would have been paid on the transfer if group relief had not applied and the land still held by the transferee company had been transferred at market value. The charge is payable by the transferee within 30 days of it ceasing to be a member of the same group as the transferor company.
4. Subsection (3) defines an appropriate proportion.
5. Subsection (4) defines group relief for the purposes of this section.
6. Subsection (5) defines ?land?, ?company? and ?group? for the purposes of this section.
7. Subsection (6) states that the Schedule supplements this section.
8. Subsection (7) provides that where the intra-group transfer is by way of an instrument which includes UK land and other property, it is treated as if it were two instruments, one relating to the land and one to the other property.
9. Subsection (8) applies this section to instruments executed after 23 April 2002 (subject to subsection (9)).
10. Subsection (9) provides that this section does not apply to an instrument which gives effect to a contract made on or before 17 April, unless the instrument results from the exercise of an option, an assignment, or further contract made after 17 April.
11. Subsection (10) deems this section to come into force on 24 April 2002.
DETAILS OF THE SCHEDULE
13. Paragraph 1 states that this Schedule supplements the section and that the definitions in the section apply to the Schedule equally.
14. Paragraph 2 provides that group relief will not be withdrawn where the transferor company leaves the group and defines where this is regarded as being the case.
15. Paragraph 3 provides that group relief will not be withdrawn where the transferee ceases to be a member of the same group as the transferor as a result of a transfer for which relief under section 75 Finance Act 1986 applies. But where the transferee company then leaves the new group within two years of the original transfer on which group relief was claimed, group relief is withdrawn in the same way as if the transferee company had ceased to be a member of the same group as the transferor.
16. Paragraph 4 states that interest applies to the amount payable under this section. Interest runs from 30 days after the transfer on which group relief was claimed.
17. Paragraph 5 states that the transferee company must provide a notification containing relevant details within 30 days of the date on which group relief is withdrawn. A penalty for failure to provide information applies if the notification is made after the 30 day period.
18. Paragraph 6 provides that regulations regarding determination, appeal against determination and the collection and recovery of the duty and interest thereon shall apply as if the amount payable were an amount of stamp duty reserve tax.
19. Paragraph 7 applies where a determination of the amount payable under the section has been issued to the transferee company, and the whole or part of the amount determined has not been paid within six months of the date on which it became payable. And provides that, in this circumstance, a notice may be issued to require any other member of the group, and any person who was a controlling director of the transferee company or of a company which controlled the transferee company at a relevant time, to pay the outstanding amount. Also defines ?relevant time?, ?director? and ?controlling director?.
20. Paragraph 8 provides that where there is an amount outstanding to be recovered from another group company or controlling director, a notice may be served which requires the amount to be paid within 30 days of that notice. The notice must be served within three years of the issue of the notice of determination to the transferee company and both the notice and the amount are treated as if it were an amount of SDRT that were due from that person. Any person who pays an amount under this paragraph may recover that amount from the transferee company and any payment is not allowed as a tax deduction.
21. Paragraph 9 provides a power for the Commissioners to require information and a penalty for failing to comply with a notice to provide information.
22. Paragraph 10 concerns interpretation.
BACKGROUND
23. This clause and schedule discourage the setting up of companies to avoid stamp duty on UK land and buildings. It prevents companies from benefiting from group relief on intra-group transfers of land and buildings where there is an onward sale of the company holding the property within a two-year period.