Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss that schedule 38 be the Thirty-eighth schedule to the Bill.

The clause and schedule provide for extended reliefs from the 15% STLD higher rate that was introduced in the Finance Act 2012. Among other things, the new reliefs extend the relief for property development trades and provide additional reliefs for a wider range of commercial uses. All the reliefs are subject to clawback if any of the stated conditions are not met during a specified period.

Some in the industry have expressed concern that the reliefs for which the Bill provides will be introduced with effect from Royal Assent, whereas the higher rate of SDLT has applied since 21 March 2012. The delay in implementing the reliefs means that genuine businesses will have every reason to defer transactions until after Royal Assent, which would have a distorting effect on economic behaviour. Although those in the industry recognise an understandable wish to ensure that the scope and drafting of the reliefs are correctly framed, they are struggling to understand the practical bars to aligning the availability of the reliefs with the higher rate charge. Will the Minister clarify for the Committee the reasons behind the delay in implementing the reliefs?

There is also one commercial situation that does not appear to be covered by the proposed reliefs: if an existing business such as a hotel, school or care home acquires a high-value dwelling in order to convert it and run it as part of its trade, rather than reselling it. The extended relief for redeveloping property appears to preclude such relief because of the references to resale, so will the Minister confirm the position with regard to that situation?

The clause and schedule introduce a series of reliefs to the 15% rate of stamp duty land tax on residential property valued at over £2 million purchased  by certain non-natural persons. As I described during our debate on the annual tax on enveloped dwellings, that term encompasses companies, partnerships that include a company, and collective investment schemes. The reliefs mirror as far as possible those being introduced for the annual tax on enveloped dwellings and for the extension to the capital gains tax regime.

The 15% rate of stamp duty land tax was introduced in 2012 as part of a package of measures aimed at tackling stamp duty land tax avoidance through the use of corporate enveloping. Under that process, a property is placed into a vehicle, often as the only asset of a company. The property can then effectively be sold by transferring the shares within that company and that transaction will not be subject to stamp duty land tax. We discussed the rationale for the measures during our consideration of the Finance Act 2012 and again during the debate on the annual tax on enveloped dwellings and the extension to the capital gains tax regime, so I do not intend to rehearse all the arguments now.

Clause 194 introduces schedule 38, which contains the reliefs. Paragraph 2 replaces the existing relief for property developers with reliefs for businesses of letting, trading in or redeveloping properties, trades involving making a dwelling available to the public, financial institutions acquiring dwellings in the course of lending, dwellings for occupation by certain employees or partners, and farmhouses. I do not intend to discuss each relief in detail as they echo the arrangements that we considered at some length for the annual tax on enveloped dwellings.

There is, however, one important variation. For each relief, the schedule inserts a new measure that provides for a three-year period during which, if conditions change so that the relief would have no longer applied at the point of purchase, the relief is withdrawn and the tax becomes payable, which is sometimes called the clawback period. This important feature is designed to protect against avoidance whereby temporary arrangements are deliberately made to avoid the 15% rate. The three-year clawback rule is a feature of other reliefs in stamp duty land tax, in particular group relief and charities relief, and the reliefs will take effect from Royal Assent.

The hon. Member for Newcastle upon Tyne North asked why the 15% reliefs are not being introduced until Royal Assent. The annual tax on enveloped dwellings has reliefs that are in effect from 1 April, which was carefully considered. The ATED will not be payable until after Royal Assent, so any changes that might have been necessary to the reliefs could be communicated and assimilated prior to a return being due, but the 15% rate is a tax on a transaction whereby tax must be paid within 30 days of the transaction. The Finance Bill becomes law when it receives Royal Assent. Until then, it is subject to change through the parliamentary process, so changes to the proposed reliefs during that time could cause difficulties for transactions in progress. Allowing the reliefs to take effect earlier than Royal Assent would cause a degree of uncertainty for taxpayers for that reason. Royal Assent is only a limited time away—I hope—so it would make little sense to change the start date at this point. Given the period of time concerned and the number of properties for which transactions may be delayed, we believe that the disadvantages outweigh the advantages.

The hon. Lady also asked why there is no relief from the 15% rate for businesses that wish to purchase a residential property and convert it to non-residential for use in their trade, such as a care home. It is a general feature of the SDLT rules that there is a different rate for property that is residential or non-residential at the time of purchase. The rules are even-handed at present in that although a higher rate will apply to residential property for conversion, a lower rate applies to non-residential property that is acquired for conversion to residential. Additionally, such a relief could open up avoidance opportunities with companies claiming non-residential intentions to take advantage of the lower rate, but then not following through with the conversion. Although we could apply a clawback provision, we could still have anomalous situations in which the conversion could not proceed within the relevant time, so the rule might not solve all potential problems. It might be difficult to determine how much time to allow for the conversion to take place as well as for other operational complexities, such as knowing whether the property will be or is being used for non-residential purposes.

Question put and agreed to.

Clause 194 accordingly ordered to stand part of the Bill.

Schedule 38 agreed to.