See s.205 of the Duties Act. This revenue ruling is intended to clarify any misunderstanding that may have resulted from the publication of Revenue Ruling SD234, and in particular the meaning of paragraph 14 of that Ruling. Whilst it is not the intention of OSR to inhibit commercial transactions or increase the administrative costs associated with the stamping of loan security documents, it is nonetheless important to ensure that the correct instrument is stamped with the ad valorem loan security duty. Incorrect stamping may preclude an instrument from being admitted as evidence in court proceedings.
Loan agreements used by lending institutions contain widely varying terms and conditions.
The OSR is of the opinion that the definition of mortgage in the Act includes an equitable mortgage. To be an equitable mortgage, a loan agreement has to be capable of specific performance, i.e. money must have been advanced by the lender to the borrower as at the date of the loan agreement. In some instances the loan agreement may come within the definition of a debenture. To qualify as a debenture the loan agreement must create or acknowledge an indebtedness of a corporation and, the indebtedness must be in respect of money deposited with or lent to the corporation . It follows therefore that if the loan agreement does not create or acknowledge an existing debt of a corporation, that loan agreement will not constitute a debenture.