By Sean Randall, tax lawyer at Deloitte:
Prior to reports that the Pre-Budget Report would be scrapped this year, rumours began circulating that the Government might introduce an indirect charge to stamp duty land tax (SDLT) on sales of units in property-rich unit trust schemes. This seems to have been based on statements made by both the Liberal Democrats (LD's) and the coalition Government. The LD's included in their manifesto: 'Prevent offshore trusts being used for SDLT planning.' And a Press Notice published in the Emergency Budget indicated that the coalition Government would examine whether changes to the SDLT rules on 'high value' property transactions are needed to prevent avoidance.
The risk of an indirect SDLT charge on unit or share sales is probably low, at least for the time being. The previous Government twice abandoned attempts to introduce such a charge on sales of property-rich companies. The reasons were two-fold. First, technical reasons connected with enforcement; and secondly, fear of collateral damage.
Were the Government inclined to introduce such a charge (following, for example, the land-rich duty regimes in the various states and territories of Australia) the scale of the change would be such that consultation on draft legislation would be needed to ensure that the legislation is effective and not disproportionate. HMRC policy would be conscious when instructing ministers of their failure to consult industry on changes to the rules on transfers of interests in partnerships in 2007, which led to retrospective rectification.
