Article by Adrian Rudd of PricewaterhouseCoopers, Tax Adviser's representative on Technical Committee, on the CIOT's paper to the Revenue setting out several ways in which the stamp duty regime would benefit from modernisation (published in the March issue of Tax Adviser). The need for exemptions for business reorganisations
The Institute outlined a number of areas where exemptions are needed. In the continuing absence of these exemptions, the effect of the capital gains tax exemptions is undermined and the charge to ad valorem duty can prevent commercially desirable transactions from taking place.
Incorporation of a business
There should be an exemption for the incorporation of a business as a going concern, in line with the CGT exemption in TCGA 1992, s. 162. Because of the absence of any relief, it was necessary in the past to gift assets and claim CGT relief under s. 165. This avenue has now been closed, as regards transfers of interests in land, by FA 2000, s. 119. Thus the need for a specific exemption becomes more acute.
Company reconstructions and partitions
The Institute believes that the restriction in FA 1986, ss. 75 - 77 to companies registered in the UK is contrary to European law. Relief should be extended to cases where the transferee company is established in any Member State of the EU, following the ECJ decisions in Halliburton Services BV v Staatssecretaris van Financien and ICI plc v Colmer and the Advocate Generals opinion in Hoechst AG and Hoechst UK Ltd v IRC (Cases C-397/98 and C-410/98).
The Institute also called for the extension of the relief under FA 1986, ss. 75 - 77 to cover situations where CGT rollover relief is available under TCGA 1992, ss. 136 and 139 as extended by SP 5/85.
Replacement of business assets
There should be an exemption from ad valorem duty on the acquisition of asset where relief under TCGA 1992, s. 152 is given by reference to that acquisition.
Other conveyances and transfers of business assets
Transfer of going concern
The Institute proposed that there should be an exemption along the lines of the VAT exemption in SI 1995/1268 reg 5 for any conveyance or transfer of a business as a going concern.
Following the enactment of FA 2000, s. 129 (exemption for instruments transferring intellectual property) the Institute called for a similar exemption for goodwill. It is understood that the Stamp Office accepts that where goodwill attaches to intellectual property, the exemption for intellectual property applies. However, this is unpublished practice and in any event it does not cover goodwill generally.
The Institute felt there should be publicity given through a Tax Bulletin article or a Press Release, highlighting the fact that the Stamp Office operate a wider definition of exempt intellectual property than the statutory definition, and that goodwill inherent in exempt intellectual property is also treated in practice as exempt.
The Institute also called for an exemption for conveyances of commercial assets such as goods, wares or merchandise, trade debts and work in progress.
The enactment of FA 2000, s. 126 puts Stamp Duty in the same position that the CGT rules were after the decision in Marren v Ingles  STC 500, but before the subsequent Extra-Statutory Concession (ESC D27). The concession was replaced retrospectively by TCGA 1992, s. 138A in 1997. The Institute believes that where s. 138A applies, there should be no ad valorem duty on the earn-out consideration.
Shares and securities
The exemptions promised by FA 1990, ss. 107 - 110 have still not materialised. Bearing in mind the increasing competition between the London Stock Exchange and other European exchanges, this reform is long overdue.
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