So-called ‘Seeding Relief' from Stamp Duty has been withdrawn under the Budget proposals issued this afternoon.
Documents released by HM Revenue & Customs state that as of 2pm today: “There will now be a stamp duty land tax charge on the transfer of property into a unit trust in consideration of the issue of units, by reference to the market value of the land and buildings transferred”
Seeding relief gives relief from Stamp Duty when property is transferred into a newly formed unit trust in consideration of the issue of units.
Section 64A of the Finance Act, 2003 currently gives relief where property is transferred to the trustees of a unit trust scheme in consideration of the issue of units, provided that after that transfer the transferor is the only unit-holder.
The relief is given so the trusts do not have to pay Stamp Duty when they buy commercial property. Typically, the duty is 4% of the purchase price, so on a £250m building it would be £10m. The withdrawal of Seeding Relief is also likely to affect some self-invested personal pensions.
The Revenue says section 64A will now be repealed. It says the chargeable consideration for a transfer of property into a unit trust in consideration of the issue of units will normally be the market value of the property.
Meanwhile section 53 of the Finance Act 2003 provides that the chargeable consideration on a transfer of property to a company ‘connected’ with the transferor, or in consideration of the issue of shares of a company ‘connected’ with the transferor, should be “not less than the market value of the chargeable interest transferred.” This will now also be extended to apply to transfers to trustees of a unit trust scheme.
Seeding relief will still apply to contracts entered into and “substantially performed” before 2 pm today or any other contract entered into before the 2 pm deadline provided the transfer to the trustees is not deemed an ‘excluded transaction’ by HM Revenue & Customs.
Excluded transactions include:
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