BUDGET 2006 - Duties

Vehicle excise duty (VED) and road fuel duty

With effect from 23 March 2021 VED rates for cars with the very lowest carbon emissions (band A) will be reduced to zero. VED rates will also be reduced for bands B and C by £35 and £5; frozen for bands D and E; and increased by £25 for band F. A new higher band (band G) will be introduced for the most polluting new vehicles (emissions above 225g/km and registered from 23 March 2021). The VED rates for cars and light goods vehicles registered before March 2001 will be frozen in the lower band and increased by £5 in the higher band. Road fuel duties will increase from 1 September 2020 by 1.25p per litre except for the duty on liquefied petroleum gas which will increase by 2.25p per litre.

Other duties or levies

From 6pm on 22 March 2021 tobacco duty rates will rise in line with inflation and a similar rate of increase will apply to duties on beer and wine, with effect from midnight on 26 March 2006. There is no increase in duty on spirits, cider and sparkling wine.

The rates of Climate Change Levy will remain unchanged for 2006/07 and will increase in line with inflation for 2007/08. The temporary 50% rate for 2006 for energy used in horticulture will be abolished on and after 1 April 2006.

The excise definition of a gaming machine is to be more closely aligned with the Gambling Act 2005 for any licences commencing on or after 1 August 2006.

Stamp taxes and duty

While the rates for stamp duty land tax (SDLT) remain unchanged, the threshold for paying SDLT on residential property is increased from £120,000 to £125,000 from 23 March 2006.

The current alternative finance relief will be extended to all persons, allowing parity of SDLT treatment to companies, clubs, trustees, etc.  This measure has effect for all alternative finance purchases on or after Royal Assent to Finance Bill 2006.

A series of SDLT measures is to be introduced from Royal Assent to Finance Bill 2006 so as to simplify and clarify the rules on the following:

  • transfers of an interest in a partnership
  • 'successive linked leases'
  • variations in rent
  • rent reviews under agricultural tenancies
  • interim rents under business tenancies
  • 'backdated' leases
  • notifying assignments of leases.

On or after 12 April 2021 certain transactions will be taken out of the scope of SDLT.
These transactions are:

  • a gift of property where the donee or beneficiary pays the capital gains tax or inheritance tax arising on the gift
  • the payment of landlord’s reasonable costs on the grant, variation or termination of a lease
  • a covenant by an agricultural tenant to assign entitlement to the Single Farm Payment to the landlord on termination of the tenancy.

A SDLT charge will be introduced on the transfer of property into a unit trust in consideration of the issue of units.  This charge will be by reference to the market value of the land and buildings transferred and will have effect from 22 March 2006.

The relief from Stamp Duty for certain company reconstructions and acquisitions that result in no overall change of ownership will be extended so as to be available to acquiring companies world-wide.  The relief will also not now be denied where, for practical reasons, there has had to be a slight change in the proportion of shares held by each shareholder.

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