FINANCE BILL 2000
CLAUSE 119: GRANT OF LEASE TO CONNECTED COMPANY
SUMMARY
1. This clause provides for stamp duty to be charged at the relevant property rate when a lease is granted to a company to which the grantor is connected. The clause takes effect for documents executed after 28 March 2000.
DETAILS OF THE CLAUSE
2. Subsection (1) applies the section where a lease is granted to a company and either the grantor is connected with that company, or some or all of the consideration for the grant of the lease consists of the issue or transfer of shares in any company with which the grantor is connected.
3. Subsection (2) states that subsection (3) takes effect for the purposes of the charge to stamp duty on leases (Part II of Schedule 13 FA 1999) by reference to the charge under Part I of Schedule 13 (conveyance or transfer on sale).
4. Subsection (3) provides that, the consideration for the transfer on sale will be no less than the value as determined under subsection (4).
5. Subsection (4) states that the value to be used as consideration is the market value immediately before the lease is granted. But this value should exclude any consideration which is not property.
6. Subsection (5) provides that this section only applies if the stamp duty charged on the lease is greater than it would be apart from this section.
7. Subsection (6) defines market value.
8. Subsection (7) defines ?company? and 'shares? for the purposes of this section.
9. Subsection (8) states that the definition of whether any person is connected with another will be in accordance with Section 839 ICTA 1988.
10. Subsection (9) concerns interpretation.
11. Subsection (10) applies this section to instruments executed on or after 28 March 2000 (subject to subsection (11)).
12. Subsection (11) provides that this section does not apply to an instrument which gives effect to a contract made on or before 21 March 2000, unless the instrument results from the exercise of an option, an assignment, or further contract made after 21 March.
13. Subsection (12) deems this section to come into force on 28 March 2000.
BACKGROUND
14. Stamp duty is chargeable on the grant of a lease under Part II of Schedule 13 FA 1999.
15. This clause prevents leases granted to companies with which the grantor is connected escaping the usual level of stamp duty charge.
16. For example, if a lease is granted to a company with which the grantor is connected in consideration for the issue of securities whose value is less than that of the lease, stamp duty would, prior to this clause, have been chargeable only by reference to the value of the securities. This clause ensures that there is a stamp duty charge at the relevant rate of duty on the market value of the lease which has been granted.
17. This clause does not affect situations where specific stamp duty exemptions apply.