Taxation (Land Transaction) (Jersey) Law
As you may be aware, the above law came into force on 1st January 2010.
Background
When a purchaser buys freehold land a tax is paid which is called Stamp Duty. Historically, the transfer of a share transfer flat was tax free. This loophole is now closed and from 1st January a tax (Land Transaction Tax or "LTT") will now be charged on the transfer of all share transfers flats. It will be administered by the Income Tax Department. LTT will be the same rate as stamp duty for freehold properties and will vary according to the price of the flat.
Stamp duty is also payable on registration of a mortgage secured on freehold property and likewise LTT will now be charged on registration of a mortgage secured on a share transfer flat.
First time buyers will receive the same discounted rates under LTT as they would for Stamp Duty
LTT is payable by the person who buys the flat. LTT is also payable by any lender who secures a mortgage relating to the purchase of the flat. It is payable within 28 days of completion of a transaction but may be paid in advance.
Beware
The new law introduces criminal offences linked to LTT. The company and any officer of the company (usually the company secretary) who is involved in the transfer of shares can be fined for registering the transfer of shares corresponding to a flat if they have not received the original LTT or a certified copy to show that the tax on the transfer has been paid.
The Income Tax Department require that receipts for the payment of LTT must be retained with the company records for at least six years following the transaction. I recommend that the receipts are retained in the company records permanently otherwise questions may be raised in the future as to whether the tax was paid when the shares were transferred.
This is a simple overview of LTT and does not cover all the details of it. There are provisions which deal with errors in calculation of the tax, appeals procedures, penalties etc. For further information please contact a member of Viberts Property Team or the Income Tax Department directly.