Reference Guides

Stamp Duty

50.1 Introduction

Stamp duty is a tax on property that is paid by the purchaser to the Commissioners of the Inland Revenue. The stamping of writs is governed basically by the Stamp Act of 1891. In order to ensure that documents are lodged with the Inland Revenue for stamping promptly, documents that are sent to the Inland Revenue more than 30 days after the execution date attract a penalty payment.

With effect from 1 December 2003 the existing stamp duty regulations are replaced by part 4 of the Finance Act 2003. Full information is provided under Stamp Duty Land Tax.

The following sections of the 1891 Act are of particular relevance to the Agency:

Section 5
All the facts and circumstances affecting the liability of any instrument to duty, or the amount of the duty with which any instrument is chargeable, are to be fully and truly set forth in the instrument.

Section 12
(1) Subject to such regulations as the Commissioners may think fit to make, the Commissioners may be required by any person to express their opinion with reference to any executed instrument upon the following questions:

(a) Whether it is chargeable with any duty;

(b) With what amount of duty it is chargeable.

(2) The Commissioners may require to be furnished with an abstract of the instrument, and also with such evidence as they may deem necessary, in order to show to their satisfaction whether all the facts and circumstances affecting the liability of the instrument to duty, or the amount of the duty chargeable thereon, are fully and truly set forth therein.

(3) If the Commissioners are of the opinion that the instrument is not chargeable with any duty, it may be stamped with a particular stamp denoting that it is not chargeable with any duty.

(4) If the Commissioners are of the opinion that the instrument is chargeable with duty, they shall assess the duty with which it is in their opinion chargeable, and when the instrument is stamped in accordance with the assessment, it may be stamped with a particular stamp denoting that it is duly stamped.

(5) Every instrument stamped with the particular stamp denoting either that it is not chargeable with any duty, or is duly stamped, shall be admissible in evidence, and available for all purpose notwithstanding any objection relating to duty.

Note: Following the repeal of section 74 of the Finance (1909-10) Act 1910, instruments effecting outright gifts or transfers for inadequate consideration are liable for stamp duty as follows, unless they bear an appropriate Exempt Instrument certificate (see Exempt categories):

1. Outright Gift (i.e. no monetary consideration passes) – £5 being a ‘conveyance of any other kind’. For the time being, adjudication is obligatory (but adjudication is not required for documents effecting a conveyance or transfer on the break-up of a marriage).
2. Transfer for inadequate consideration (i.e. where the value of property exceeds the amount of the consideration) – CL on the consideration paid. Adjudication is not required.

Abolition of ad valorem duty on gifts applies to instruments executed on or after 19 March 1985 which are stamped on or after 26 March 1985.

Adjudication
In certain cases, the Inland Revenue will allow a writ which requires adjudication to be presented for registration before the adjudication process has been completed. In these circumstances, the writ must bear the adjudication number and be accompanied by a letter from the Inland Revenue allowing it to be registered. It is not sufficient for the agents to send to the Keeper a letter undertaking the return of the writ to the Inland Revenue after it has been registered.

Section 14
‘(4) …an instrument…relating to any property situate….in any part of the United Kingdom shall not…..be available for any purpose whatever, unless it is duly stamped….’

Section 15
‘(2) In the case of such instruments hereinafter mentioned as are chargeable with ad valorem duty the following provisions shall have effect:

(a) The instrument, unless it is written duly upon stamped material, shall be duly stamped with the proper ad valorem duty before the expiration of 30 days after it is first executed, or after it has been first received in the United Kingdom in case it is first executed at any place out of the United Kingdom, unless the opinion of the Commissioners with respect to the amount of duty with which the instrument is chargeable has, before expiration, been required under the provisions of this Act.’

As there is no power to recover a penalty for late stamping once a writ has been duly stamped, it is unnecessary for registration officers to scrutinise stamped writs to ascertain whether they have been stamped in time.

Section 17 (as amended by section 117 and schedule 17 of the Finance Act 1999)
If any person whose office it is to enrol, register, or enter in or upon any rolls, books or records any instrument chargeable with duty, enrols, registers, or enters any such instrument not being duly stamped, he shall incur a fine not exceeding £300.

Note: this section is the Keeper’s authority for refusing to register a writ unless it is duly stamped.

50.2 Date of execution

In conveyancing terms, the date of execution of a deed is the date upon which a deed is subscribed. For stamp duty purposes only, the date of execution is now defined as the date on which the deed is delivered. This definition resolves a long-standing debate about the meaning of the date of execution in Scotland in relation to stamp duty, but two complications remain. Firstly, delivery does not necessarily mean the handing over of the deed. A mere indication by the seller that they are bound by the terms of the deed can amount to delivery. (In practice, such an indication will usually take the form of handing over the deed to the purchaser in exchange for the purchase price). The other complication is that if the deed has been delivered subject to conditions, it will not be treated as executed until those conditions have been fulfilled.

The definition applies to documents executed (as defined) on or after 8 December 1993.

50.3 Stamping of writs

Parliament determines whether or not a writ is liable to stamp duty, and if so the amount payable. The threshold for transactions attracting stamp duty has changed considerably over the years. At present stamp duty is calculated on transactions where the consideration is over £60,000.

50.4 Finance Act certificates

Transactions with a consideration of £60,000 or less do not attract stamp duty. To obtain the exemption from duty, conveyances must contain an appropriate Finance Act certificate, first introduced by the Finance Act 1910. Certificates need not be in gremio and are also competent when endorsed on writs and subscribed by the granter(s) (but not by the agent), together with any consenter conveying their interest in the property. The signatures of consenters, such as heritable creditors or spouses under Matrimonial Homes legislation, are not necessary.

The statutory wording of the certificate is:

• ‘I / we certify that the transaction hereby effected does not form part of a larger transaction or of a series of transactions in the respect of which the amount or value or aggregate amount or value of the consideration exceeds £60,000.’

Stamp duty is charged at an abated rate on transactions where the total value exceeds £60,000 but is less than the amount specified in the relevant statute (see Stamp Duty Rates). To take advantage of the abated rate, the deed must include a Finance Act certificate in the above style, but amended to state the relevant tax threshold.

The Inland Revenue recommends and prefers the full version of the certificate although the shortened version ending at the word ‘transactions’ is acceptable in sale situations. The certificate should conform reasonably closely to the statutory form. A double negative, for example, is not acceptable.

In voluntary conveyances where the stamp duty requires to be adjudicated and there is difficulty in accurately determining the value of the property, the Inland Revenue is prepared to accept a certificate in the following terms:

‘I/We certify that the transaction hereby effected does not form part of a larger transaction or of a series of transactions.’

50.5 Exempt categories

Before the introduction of the Stamp Duty (Exempt Instruments) Regulations 1987, many transactions attracted a minimum duty of 50 pence. Further, where the relationship between the granters and grantees were husband/wife, brother/sister those transactions and others required to be lodged with the Inland Revenue for adjudication.

The regulations apply to instruments executed on or after 1 May 1987 that effect the conveyance or transfer of property of any description that fall within the categories below.

1. The vesting of property subjects to a trust in the trustees of the trust on the appointment of a new trustee, or in the continuing trustees on the retirement of a trustee.
   
2. The conveyance or transfer of property, the subject of a specific devise or legacy to the beneficiary named in the will (or his nominee)*.
   *Note: Transfers in satisfaction of a general legacy of money should not be included in this category (see category D).
   
3. The conveyance or transfer of property which forms part of an intestate’s estate to the person entitled on intestacy (or his nominee)*
   .*Note: Transfers in satisfaction of the transferee’s entitlement to cash in the estate of an intestate, where the total value of the residuary estate exceeds that sum should not be included in this category (see category D).

   a)Appropriations in or towards satisfaction of a general legacy of money (section 84(4) Finance Act 1985).
   b)Appropriations in or towards satisfaction of any interest of a surviving spouse in the intestate’s estate (section 84 (5) Finance Act 1985).
   c)Appropriation in Scotland in or towards satisfaction of the right of a husband to jus relicti, of a wife to jus relictae or of children (including adopted children) or remoter issue to legitum (Section 84 (7) Finance Act 1985).

   Transfers within these descriptions are no longer required to be adjudicated if they are certified within category D.

4. The appropriation of property within section 84(4) of the Finance Act 1985 (death: appropriation in satisfaction of a general legacy of money) or section 84(5) or (7) of that Act (death: appropriation in satisfaction of any interest of surviving spouse and, in Scotland, also of any interest of issue).
   
5. The conveyance or transfer of property which forms part of the residuary estate of a testator to a beneficiary (or his nominee) entitled solely by virtue of his entitlement under the will.
   
6. The conveyance or transfer of property out of a settlement in or towards satisfaction of a beneficiary’s interest, not being an interest acquired for money or money’s worth, being a conveyance or transfer constituting a distribution of property in accordance with the provisions of the settlement.
   
7. The conveyance or transfer of property on and in consideration only of marriage to a party to the marriage (or his nominees) or to trustees to be held on the terms of a settlement made in consideration only of the marriage*.
   *Note: A transfer made to the husband or wife after the date of the marriage is not within this category unless it is made pursuant to an ante-nuptial contract, although it may fall within category L.
   
8. The conveyance or transfer of property within section 83(1) of the Finance Act 1985 (transfer in connection with divorce etc.)
   
9. The conveyance or transfer by the liquidator of property which formed part of the assets of the company (or his nominee) in or towards satisfaction of the shareholder’s rights on a winding-up.
   
10. The grant in fee simple* of an easement in or over land for no consideration in money or money’s worth.
    *Note: Category J is not relevant to Scotland; it is used in England and Wales.
    
11. The grant of a servitude for no consideration in money or money’s worth.
    
12. The conveyance or transfer of property operating as a voluntary disposition inter vivos for no consideration referred to in section 57 of the Stamp Act 1891 (conveyance in consideration of a debt etc.)*.
    *Note: Gifts of property within this category are no longer required to be adjudicated if they are so certified. Those transfers of property subject to or in satisfaction of a debt which are transfers on sale liable to ad valorem duty are not within this category.
    
13. The conveyance or transfer of property by an instrument within section 84(1) of the Finance Act 1985 (death: varying disposition)*.
    *Note: Transfers within this category are no longer required to be adjudicated if they are so certified.

50.5.1 Exemption certificate

To benefit from the 1987 regulations, agents must include an Exemption Certificate in place of the Finance Act Certificate.

The suggested form of words is:

‘I/we certify that this instrument falls within category ... * in the schedule to the Stamp Duty (Exempt Instruments) Regulations 1987.’

*Category letter A to M should be inserted.

An instrument falling within more than one category will be regarded as exempt if correctly certified for either category or both. The certificate must be included in, endorsed, or attached to the instrument. Endorsement after execution is permissible. Any attached certificates will require to comply with the Requirements of Writing (Scotland) Act 1995 for ordinary annexations (see chapter 13). Where the instrument effects a conveyance or transfer of land, the certificate should preferably not be attached to the instrument but be included in or endorsed upon it. An endorsed or attached certificate may be signed by a solicitor as agent, provided the signatory’s designation appears after the signature.

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