All Other Reliefs

(SDLT Classifications, Reliefs and Exemptions)

Chapter Summary: This chapter explores the various SDLT reliefs and exemptions available in the UK, highlighting their potential to significantly reduce tax liabilities for eligible property transactions.

Key Points

  • SDLT reliefs are tailored for specific transaction types, encouraging activities like first-time home buying and charitable property acquisitions.
  • Relief eligibility hinges on meeting precise criteria related to the property’s nature, the buyer’s status, or the transaction’s purpose.
  • Documentation and compliance are crucial for claiming any SDLT relief, with some requiring proactive claims while others are automatic.

Main Principles

  • SDLT reliefs are designed to support economic activities, affordability in housing, and charitable efforts by reducing the tax burden.
  • Understanding and meeting the eligibility criteria for each relief is essential for maximising financial benefits during property transactions.

Compulsory Purchase Facilitating Development SDLTM22000

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

The Compulsory Purchase Facilitating Development relief exempts local authorities from SDLT on land bought via compulsory purchase for development, encouraging public benefit projects by reducing costs and facilitating efficient land use for development.

Summary: The Compulsory Purchase Facilitating Development relief, as outlined in SDLTM22000 and detailed in SDLTM22005, offers SDLT relief for land acquisitions made under a compulsory purchase order (or a vesting order in Northern Ireland) intended to facilitate development.

Explanation: This relief applies when a developer, typically in collaboration with a local authority, needs to purchase land for a major development project. If negotiations with landowners fail, the local authority can issue a compulsory purchase order to acquire the land. 

The relief is designed to exempt the local authority from SDLT on this initial acquisition, assuming the land is eventually sold to the developer for the purpose of development. The relief is contingent on the land being developed by a party other than the local authority itself.

Examples Where This Relief Can Be Applied with Calculations:

  • Scenario: A local authority supports a housing project requiring the acquisition of several plots valued at £500,000 in total. The developer’s negotiations with landowners stall, prompting the local authority to exercise a compulsory purchase order. Without relief, the local authority would face an SDLT charge based on the £500,000 purchase price, subject to current SDLT rates. However, with this relief, the SDLT on the local authority’s acquisition is waived.
  • Calculation: Without the relief, assuming a standard non residential SDLT rate, the SDLT due would be £14,500. With the relief, the local authority pays £0 in SDLT for the initial purchase.

Why the Relief Has Been Put in Place: This relief mechanism encourages and facilitates essential development projects that benefit the public, such as housing developments or infrastructure improvements. By removing the SDLT burden from the initial compulsory acquisition by a local authority, it helps to lower the overall cost of development projects. 

This, in turn, supports the efficient use of land and contributes to the economic development of the area. The relief is specifically designed to ensure that SDLT does not become a barrier or a double burden in situations where land needs to be compulsorily acquired to enable development projects that require cooperation between developers and local authorities.

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Reliefs: Compliance with Planning Obligations SDLTM22500

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

The Compliance with Planning Obligations relief prevents double SDLT charges for developers transferring facilities like roads or schools to public authorities as part of planning agreements, encouraging the development of public infrastructure without extra tax burdens.

Summary: The Compliance with Planning Obligations relief under FA03/S61 is intended to prevent a double SDLT charge for developers who fulfil planning obligations by transferring newly developed facilities (e.g., roads, schools) to a public authority.

Explanation: Developers often agree to construct certain facilities or make improvements as part of receiving planning permission from local authorities. When these facilities are completed, they are typically transferred to a public authority, which could lead to a double SDLT charge: once when the developer acquires the land and again when transferring the completed facility to the public authority. 

This relief allows the developer to avoid the second charge, ensuring that the public authority, which often seeks reimbursement for the SDLT from the developer, is not burdened by this tax.

Examples Where This Relief Can Be Applied with Calculations:

  • A developer agrees to build a new road as part of a housing development and acquires land for this purpose. Upon completion, the road is transferred to the local highways authority. Without relief, the developer faces SDLT on both the land acquisition and the transfer to the authority.

For instance, if the land acquisition cost £500,000 (with SDLT calculated accordingly) and the value of the completed road (if it were to be sold rather than transferred under planning obligations) is £200,000, normally, the developer might face SDLT charges on both transactions. However, by claiming this relief, the transfer of the road incurs no additional SDLT.

Why the Relief Has Been Put in Place: This relief was established to encourage developers to comply with planning obligations by mitigating the financial burden of SDLT. It recognises the importance of developers’ contributions to public infrastructure and services as part of development projects. 

By offering relief from SDLT on the transfer of such infrastructure to public authorities, it supports the development of necessary public facilities without imposing undue financial pressure on developers.

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Zero Carbon Homes Relief (SDLTM20700)

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

Zero Carbon Homes Relief offers SDLT exemptions or reductions for new, energy-efficient homes, promoting sustainable development and supporting environmental goals.

Summary: Zero Carbon Homes Relief offers a significant SDLT break for the purchase of new homes that achieve a specified standard of energy efficiency. This initiative encourages the development and acquisition of environmentally sustainable homes.

Explanation: Introduced in the 2007 Budget and effective from October 1, 2007, this relief targets newly built homes, including flats, that are certified as zero carbon. Homes under £500,000 are exempt from SDLT, while those above £500,000 receive a £15,000 reduction in their SDLT bill. 

The legislation, detailed in FA03/S58A and 58B and further outlined in The Stamp Duty Land Tax (Zero-Carbon Homes Relief) Regulations 2007, sets the criteria for what constitutes a zero-carbon home.

Examples Where This Relief Can Be Applied with Calculations: 

  • A newly built zero-carbon home purchased for £450,000 would ordinarily incur SDLT but is fully exempt under this relief.
  • For a zero-carbon home bought for £600,000, the SDLT calculation would deduct £15,000 from the tax that would typically be due, effectively reducing the SDLT liability.

Why the Relief Has Been Put in Place: This relief was designed to stimulate the construction and purchase of zero-carbon homes, aligning with broader environmental goals by providing financial incentives for developers and buyers to invest in energy-efficient properties. It aims to promote a shift towards more sustainable living spaces, reducing carbon footprints and supporting the UK’s climate change targets.

Key Points:

  • Eligibility: Applies to first acquisitions of dwellings meeting zero-carbon standards from October 1, 2007, to September 30, 2012.
  • Definition: Zero-carbon homes must have net zero CO2 emissions from energy use annually, necessitating high construction standards and renewable energy integration.
  • Claim Process: Claims for relief are made via the land transaction return, using code 30 for zero-carbon homes relief. Full relief claims require no payment submission, while partial relief on properties over £500,000 requires payment for the SDLT due minus the £15,000 relief.

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Acquisition Relief (Tax at 0.5%) – SDLTM23220

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

Acquisition Relief lowers SDLT to 0.5% for company acquisitions involving share issuance, aiming to make corporate restructuring and mergers more financially viable by reducing tax costs.

Summary: Acquisition relief reduces the Stamp Duty Land Tax (SDLT) rate to 0.5% for transactions involving the acquisition of all or part of another company’s undertaking, under specific conditions related to share issuance and financial considerations.

Explanation: This relief applies when one company acquires the undertaking of another company and the transaction includes land. The relief is contingent upon the consideration for the acquisition consisting wholly or partly of the issue of non-redeemable shares by the acquiring company to either the target company or its shareholders. 

To qualify, any cash component must not exceed 10% of the nominal value of the issued shares, and/or include the assumption or discharge of the target company’s liabilities, provided no associated companies are involved in arrangements related to the share issuance.

Examples Where This Relief Can Be Applied with Calculations:

  • Company A acquires Company B, issuing non-redeemable shares valued at £1,000,000 to Company B’s shareholders. If Company A also assumes £50,000 of Company B’s liabilities, the total consideration is £1,050,000. Since the cash component (liabilities assumed) does not exceed 10% of the share value, SDLT is charged at 0.5%, resulting in a tax liability of £5,250.
  • Merger Scenario: Company C merges with Company D, where Company C issues £2,000,000 in non-redeemable shares and pays £100,000 in cash (5% of the share value) as part of the acquisition. The SDLT due would be £2,100,000 * 0.5% = £10,500.

Why the Relief Has Been Put in Place: Acquisition relief encourages corporate restructuring and mergers by minimising the SDLT burden associated with these transactions. It facilitates the growth and consolidation of businesses by making it more financially viable to acquire or merge with other companies, promoting economic efficiency and scalability. 

This relief is specifically designed to support transactions where the consideration involves the issuance of shares, aligning with corporate finance practices and acknowledging the non-cash nature of such deals.


Alternative Property Finance (SDLTM28000)

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

Alternative Property Finance reliefs equalise SDLT for Islamic finance products with traditional mortgages, preventing double taxation and supporting financial inclusivity by accommodating non-interest-based transactions.

Alternative property finance reliefs under SDLTM28000 provide a way for transactions involving certain Islamic finance products to be taxed fairly in comparison to traditional mortgage transactions. These reliefs are designed to prevent double taxation that could occur due to the unique structure of Islamic finance agreements, ensuring the SDLT payable aligns with that of conventional mortgage products.

Explanation: Sharia financing, also known as Islamic financing, offers an alternative approach to conventional property buying, especially in jurisdictions like the UK where Stamp Duty Land Tax (SDLT) is a significant consideration. 

This method aligns with Islamic law, which prohibits the payment or receipt of interest (riba). Here’s a detailed look at how SDLT applies in Sharia financing scenarios:

Fundamentals of Sharia Financing:

  • Principle: Islamic finance operates on the principle of risk-sharing and asset-based financing, avoiding interest.
  • Property Purchase: In this system, a bank or financial institution purchases the property outright, becoming the legal owner.
  • SDLT Payment: The bank, as the initial purchaser, is responsible for paying the SDLT on the property.

Operational Mechanism:

  1. Initial Transaction: The bank buys the property at the market value. For example, if a property is valued at £300,000, the bank pays this amount to the seller.
  2. SDLT Responsibility: Upon purchasing the property, the bank pays the applicable SDLT. Continuing with the example, if the SDLT rate is 2% for the given bracket, the bank pays £6,000 as SDLT.
  3. Lease Agreement: The individual then enters into a lease agreement with the bank. This lease typically includes terms for rent payments and a gradual transfer of property ownership to the individual.
  4. Rent Plus Ownership Component: The individual’s monthly payments to the bank include rent and a portion that counts towards acquiring a stake in the property.

Scenarios and Examples:

  1. Example of Implementation: Consider Ahmed, who wants to buy a home but cannot use a conventional mortgage due to his religious beliefs. He opts for Sharia financing. A bank purchases a home worth £300,000 and pays the SDLT of £6,000. Ahmed then leases this home from the bank, with a portion of his monthly payments going towards eventually owning the home.
  2. Completion of Purchase: Over time, as Ahmed continues to make payments, he gradually buys out the bank’s share in the property until he eventually becomes the sole owner.

Key Points of Consideration and Potential Misunderstandings:

  • Passing SDLT Costs to the Buyer: While the bank initially pays the SDLT, this cost is usually factored into the lease payments, effectively passing it on to the buyer.
  • Ownership Transition Clarity: The transition from the bank’s ownership to the individual’s full ownership is gradual and based on the lease-to-own agreement terms. This period can sometimes lead to misunderstandings about immediate property rights.

Specific SDLT Reliefs in Sharia Financing:

  • Initial SDLT Payment by Bank: The bank pays the SDLT upfront, calculated based on the property’s purchase price.
  • No Additional SDLT on Ownership Transfer: When the individual eventually assumes full ownership of the property, no further SDLT is payable, as the property is not ‘purchased’ again but transferred as part of the agreed lease-to-own plan.

SDLT Calculations Example:

  • For a £300,000 Property: If the SDLT rate is 2%, the initial SDLT would be £6,000.
  • Lease Agreement Payments: These would include a component covering the SDLT initially paid by the bank.

Why the Relief Has Been Put in Place: The relief ensures that individuals using alternative property finance arrangements, particularly those compliant with Islamic finance principles, do not face a higher SDLT burden than those using conventional mortgage products. 

It recognises the importance of providing equitable tax treatment for diverse financial practices and supports financial inclusivity by accommodating the needs of those who, for religious or ethical reasons, choose alternative financing methods.


Alternative Finance Investment Bonds SDLTM27500

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

Exemptions from SDLT for social housing providers support affordable housing development by reducing financial burdens on transactions funded by public subsidy or involving tenant-controlled organisations.

SDLTM27500 outlines exemptions from Stamp Duty Land Tax (SDLT) for specific acquisitions by registered providers of social housing, emphasising support for affordable housing development.

Explanation: Under FA03/S71, transactions are exempt from SDLT when undertaken by profit-making registered providers of social housing, funded by public subsidy, or when the purchaser is a relevant housing provider meeting certain criteria.

This includes transactions where the housing provider is tenant-controlled, the vendor is a recognised qualifying body, or the purchase is assisted by public subsidy.

Examples Where This Relief Can Be Applied:

A non-profit housing association (a relevant housing provider) purchases land for £500,000 with a grant from the Homes and Communities Agency. Normally, SDLT would be calculated based on the purchase price, but due to the public subsidy, this transaction qualifies for exemption.

A social housing provider controlled by its tenants buys a property for £300,000 from a local council (a qualifying body). The usual SDLT would be absent under these conditions, facilitating more affordable housing development.

Why the Relief Has Been Put in Place: This SDLT exemption supports the growth and sustainability of affordable housing by reducing the financial burden on social housing providers. 

It encourages the development and transfer of properties within the sector, especially those funded by public subsidies or managed by tenant-controlled organisations. The relief aligns with broader governmental objectives to increase the availability of social housing and support communities in need.

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Group Relief – SDLTM23010

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

➤ Group Relief exempts SDLT on property transactions within a corporate group, promoting operational flexibility and strategic restructuring without tax penalties.

Group Relief under SDLTM23010 offers exemption from Stamp Duty Land Tax (SDLT) for property transactions within a group of companies, facilitating the free movement of property for commercial reasons without SDLT implications.

Explanation: This relief applies when both the purchaser and vendor of a chargeable interest are companies within the same group at the effective date of the transaction. 

The relief is designed to prevent SDLT from becoming an impediment to corporate restructuring or internal group transactions involving land and buildings. Specific conditions must be met to qualify for this relief, and there are certain restrictions on its availability.

Examples Where This Relief Can Be Applied with Calculations:

  • Example: Company A and Company B are both part of the same corporate group. Company A transfers a commercial property valued at £2 million to Company B. Normally, this transaction would incur SDLT charges based on the non-residential rates applicable to the £2 million transaction value. However, by claiming Group Relief, Company B can acquire the property without incurring any SDLT.

Calculation Without Relief: Assuming a non-residential SDLT rate of 5% on the portion above £250,000, the SDLT would be £89,500 without relief.

Calculation With Relief: £0 in SDLT due to Group Relief.

Why the Relief Has Been Put in Place: Group Relief exists to support the operational flexibility of corporate groups, allowing them to restructure and realign their property holdings without the additional financial burden of SDLT. 

This facilitates strategic business decisions, including restructuring, consolidation, or expansion within a corporate group, without being penalised by tax considerations. The relief recognises the commercial reality that transactions within a corporate group do not introduce new risks or changes in property ownership from an economic perspective outside the group.

SDLT Reliefs for Inter-Company Property Transfers

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

➤ SDLT relief for inter-company property transfers within a corporate group allows for tax-exempt asset restructuring, provided the companies remain within the same group, supporting strategic reorganisation without additional tax costs.

Context of Inter-Company Property Transfers:

  • Mechanism: This relief applies when one company within a group transfers property to another company within the same group. It is often used for internal asset restructuring or reorganisation of the group’s property holdings.
  • Key Condition: The companies involved must be part of the same corporate group.

Scenarios and Examples:

  1. Asset Restructuring Example: Company A, which is part of a larger corporate group, owns a commercial building. To consolidate its real estate assets, the group decides to transfer this building to Company B, another group member. This transfer can qualify for SDLT relief.
  2. New Subsidiary Acquisition: A group forms a new subsidiary, Company C, and decides to transfer a property from Company A to Company C for strategic reasons. This transaction may also qualify for SDLT relief if all the conditions are met.

Potential Pitfalls and Areas to Get Caught Out:

  • Group Structure Changes: If the group structure changes within a certain period after the transfer (commonly three years), the relief may be withdrawn, leading to SDLT becoming payable.
  • Non-Group Entities: Transfers involving entities outside the group do not qualify for this relief.

Applicable Stamp Duty Reliefs:

  • SDLT Rate for Qualifying Transfers: 0% if the transfer qualifies under group relief.
  • Recapture of Relief: If the group structure changes within a specified period, usually three years, the relief may be withdrawn.

Examples with Specifics:

  1. Internal Asset Management: Company A transfers a property valued at £2 million to Company B. Normally, this would incur an SDLT of around £89,500. However, under the group relief, this SDLT can be reduced to £0, provided all conditions are met.
  2. Relief Withdrawal Scenario: If, within three years, Company A exits the group or the group structure changes in a way that invalidates the initial conditions of the relief, the SDLT of £89,500 becomes payable.

Reconstruction Relief (SDLTM23210)

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

➤ Reconstruction Relief exempts SDLT on business acquisitions within a corporate restructuring plan, facilitating genuine reorganisation without tax barriers to promote efficiency and economic neutrality.

Reconstruction relief under SDLTM23210 provides an exemption from Stamp Duty Land Tax (SDLT) for transactions involving the acquisition of a business or part of it by a company from another, as part of a scheme aimed at the reconstruction of the target company.

Explanation:

This relief applies when a company acquires the business or a portion of the business of another company (the target company), and the acquisition is executed in line with a reconstruction plan. To qualify for the relief, the consideration for the acquisition must either be entirely in the form of non-redeemable shares or partly in non-redeemable shares with the remainder consisting of assumed or discharged liabilities of the target company. 

Post-acquisition, the shareholder composition must mirror each other in both companies, ensuring that the proportional shareholding remains the same or as close as possible, ensuring the reconstruction is for genuine commercial reasons and not for tax avoidance.

Examples Where This Relief Can Be Applied with Calculations:

  • Company A acquires Company B, where Company B’s shareholders receive non-redeemable shares in Company A as part of the transaction. No cash is involved; instead, Company A assumes certain liabilities of Company B. If Company B is valued at £2 million and Company A issues shares equivalent to this value, normally SDLT would be due on the property value involved in the transaction. However, with reconstruction relief, SDLT would not be applicable, saving potentially tens of thousands in taxes, depending on the property’s SDLT rate.

Why the Relief Has Been Put in Place:

Reconstruction relief is designed to facilitate genuine corporate restructuring without the additional financial burden of SDLT. It encourages the healthy realignment and consolidation of businesses by removing tax barriers, promoting efficiency, and allowing for more straightforward corporate reorganisations. 

This relief is particularly important in ensuring that commercial decisions are not unduly influenced by tax considerations, thereby supporting the broader economic principle of neutrality in tax law.

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Relief. Incorporation of a Limited Liability Partnership (SDLTM24500)

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

➤ Relief for incorporating a Limited Liability Partnership exempts SDLT on property transfers within one year of incorporation, encouraging business formalisation without tax penalties.

Relief from Stamp Duty Land Tax (SDLT) is available for transactions transferring a chargeable interest from a person to a limited liability partnership (LLP) as part of its incorporation, under specific conditions outlined in FA03/S65.

Explanation:

This relief applies when a chargeable interest, such as land or property, is transferred to an LLP within one year of its incorporation. The relief is contingent upon all of the following conditions being met:

  1. The transferor is a partner in a partnership that includes all members of the newly formed LLP (and no one else), or holds the chargeable interest as a nominee or bare trustee for one or more partners.
  2. The proportions of interest held by the partners before and after the transaction do not change as part of a scheme aimed at tax avoidance.
  3. The “relevant time” is defined as immediately after the transferor acquired the chargeable interest if it was post-incorporation of the LLP, or immediately before incorporation if the interest was acquired earlier.

Examples Where This Relief Can Be Applied with Calculations:

  • Example 1: A partnership owns a property valued at £500,000. Upon incorporation into an LLP, if the property is transferred to the LLP, normally, SDLT could be due based on current rates. However, if the transfer meets the relief conditions, SDLT would be £0.
  • Example 2: If a partner holding a property for the partnership worth £300,000 transfers it to the LLP within one year of incorporation, and all conditions are met, the transfer would typically incur SDLT. Under this relief, no SDLT would be due.

Why the Relief Has Been Put in Place:

This relief is designed to facilitate the formal incorporation of partnerships into LLPs without incurring additional tax burdens. It recognises the continuity of business under a different legal structure and encourages the formalisation and restructuring of businesses by removing potential tax barriers associated with the transfer of property assets during incorporation.

Relief. Demutualisation of an Insurance Company – SDLTM23500

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

Demutualisation relief exempts SDLT for mutual insurance companies turning into limited companies, facilitating modernization and market access without tax hurdles.

This SDLT relief applies to land transactions occurring in connection with the transfer of a mutual insurance company’s business to a limited company. It mirrors the relief from stamp duty outlined in FA97/S96, extending it to cover Stamp Duty Land Tax (SDLT).

Explanation: Demutualisation involves the transformation of a mutual insurance company (owned by its policyholders rather than shareholders) into a publicly traded limited company. 

Policyholders typically receive shares in the new company in exchange for their ownership rights in the mutual. This relief is designed to facilitate such transitions by providing an SDLT exemption for land transactions related to the business transfer process.

Examples Where This Relief Can Be Applied with Calculations:

  • Example: A mutual insurance company owns office buildings valued at £5 million. It undergoes demutualisation, transferring its assets, including the land, to a newly formed limited company. Ordinarily, this transfer might incur SDLT of £239,500 (using SDLT rates as of a specific date for non-residential property). Under this relief, the transaction would be exempt from SDLT, saving the company £239,500.

Why the Relief Has Been Put in Place: The relief supports the restructuring of mutual insurance companies into limited companies, facilitating modernisation and access to capital markets. It ensures that the SDLT does not hinder such transformations, recognising the unique nature of mutuals and their conversion into stock companies. 

This is particularly important for the insurance sector’s health and competitiveness, allowing these companies to adapt to changing market conditions without incurring prohibitive tax costs.

Registered Social Landlords Relief (SDLTM27500)

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

Registered Social Landlords Relief exempts SDLT for property acquisitions by social housing providers, encouraging affordable housing projects with public subsidies.

The Registered Social Landlords Relief, outlined in SDLTM27500, provides exemption from Stamp Duty Land Tax (SDLT) for certain property acquisitions by registered social landlords. This relief applies to land transactions funded with public subsidies and to profit-making registered providers of social housing.

Explanation:

  • Land transactions entered into by profit-making registered providers of social housing are exempted from SDLT if they receive public subsidy assistance.
  • Transactions are also exempt if the purchaser is a relevant housing provider and meets specific conditions: a) The provider is controlled by its tenants. b) The vendor is a qualifying body. c) The transaction receives public subsidy assistance.

Examples Where This Relief Can Be Applied:

  1. A profit-making registered provider of social housing purchases a property for £200,000 with a public subsidy of £50,000. SDLT exemption applies, and no tax is payable.
  2. A relevant housing provider, controlled by its tenants, acquires land worth £300,000 with a public subsidy of £20,000. SDLT exemption is granted, and no tax is due.

Why the Relief Has Been Put in Place: The relief aims to support the provision of social housing by reducing the financial burden of SDLT on registered social landlords. It encourages the use of public subsidies to facilitate affordable housing projects. 

This aligns with the broader social housing goals of the government. Relief code “23” should be used when applying for this exemption on a land transaction return.

Relief. Collective Enfranchisement by Leaseholders (SDLTM28500)

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

Collective Enfranchisement by Leaseholders Relief allows leaseholders buying their building’s freehold together to pay a fairer SDLT rate, calculated per leaseholder, making the process more affordable.

This relief, known as Collective Enfranchisement by Leaseholders, is applicable when leaseholders of flats join together to exercise their statutory right to purchase the freehold of the building. It allows them to determine the rate of Stamp Duty Land Tax (SDLT) based on the proportion of the consideration related to the number of participating leaseholders, making it more equitable.

Explanation: When leaseholders collectively purchase the freehold of a building, the freehold is acquired in a single transaction by a nominee or appointee acting on behalf of the leaseholders. 

This relief is designed to calculate the SDLT rate by dividing the total consideration for the freehold by the number of flats involved in the purchase. The applicable tax rate is then applied to this proportion of the consideration, aligning it more closely with the SDLT that would apply if each leaseholder purchased their share of the freehold separately.

Examples Where This Relief Can Be Applied: For instance, if a nominee representing eight out of ten flats in a block (one of which leases two flats) purchases the freehold for £500,000, the consideration is divided by eight (£62,500). In this case, the tax rate is 0%, resulting in no SDLT payable.

To claim this relief, the nominee or appointee must use relief code 25 in the land transaction return.

Why the Relief Has Been Put in Place: This relief was established to encourage collective enfranchisement by leaseholders, allowing them to pool resources and purchase the freehold of their building more cost-effectively. It ensures that the SDLT payable is fair and proportionate to the collective purchase, rather than imposing a higher tax burden that would be the case if each leaseholder purchased separately.

Please note that this relief is applicable to transactions with an effective date on or after 22 April 2009, and it was not available for purchases made before this date or for transactions involving a statutory “right to enfranchise” (RTE) company as outlined in Section 4A of the Leasehold Reform, Housing & Urban Development Act 1993.

Charities Relief – SDLTM26000

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

Charities Relief exempts SDLT for charities buying property for their activities, reducing costs and supporting their mission and growth.

Charities Relief provides an exemption from Stamp Duty Land Tax (SDLT) for charities or charitable trusts purchasing an interest in land, under specific conditions. It aims to support charitable activities by reducing the cost of acquiring property.

Explanation: This relief applies when a charity registered in England, Wales, Scotland, or Northern Ireland, or a charitable trust, purchases land or property for use in its charitable activities and not for resale. 

Conditions include the charity’s continued operation and the property’s use for charitable purposes for three years post-transaction. A clawback provision requires the repayment of the relief if the property is later used for non-charitable purposes or if the charity ceases to be recognised as such within this period.

Examples Where This Relief Can Be Applied:

  • Example: For a charity purchasing a new office building for £2 million, normally, the Stamp Duty Land Tax (SDLT) would be £89,500. With Charities Relief, assuming the charity meets the necessary conditions for the relief, the SDLT due could be reduced to £0, saving the charity £89,500. ​ 

Why the Relief Has Been Put in Place: Charities Relief was established to support the charitable sector by making it more financially feasible for charities to acquire property essential for their operations. 

By reducing the overhead costs associated with property transactions, charities can allocate more resources towards their core mission and activities. This relief acknowledges the valuable role charities play in society and aims to encourage their growth and sustainability.

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Relocation of Employment – SDLTM21060

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

Relocation of Employment Relief exempts SDLT for employers buying homes for employees who must move for work, making job-related relocation easier and more affordable.

This relief exempts Stamp Duty Land Tax (SDLT) on the purchase of a dwelling by an employer when an employee must relocate for work purposes, provided specific conditions are met.

Explanation: The SDLT relief for relocation of employment is designed to support employees who need to move closer to a new or changed place of work. 

For the purchase to be exempt from SDLT, the employee must have lived in the dwelling as their main residence at some point during the two years before the employer’s purchase. The move must be necessary due to job relocation, the purchase price must not exceed the dwelling’s market value, and the land acquired should not exceed the permitted area.

Examples Where This Relief Can Be Applied:

  • Example: An employer buys a property valued at £300,000 for an employee who is relocating. The employee lived in the property for the past year. Normally, the SDLT would be £5,000 (based on SDLT rates for a £300,000 non-first-time buyer residential property). If all conditions for relocation relief are met, the employer would pay £0 in SDLT.
  • Partial Relief Example: If the property includes land beyond the permitted area, and the market value of the permitted area is £280,000, but the total property value is £300,000, the chargeable consideration for SDLT purposes would be £20,000 (the difference between the total market value and the market value of the permitted area).

Why the Relief Has Been Put in Place: The relocation of employment SDLT relief aims to alleviate the financial burden on employees required to move closer to their workplace due to employment changes. It encourages mobility within the workforce, facilitating smoother transitions for employees becoming part of a new team, changing their duties, or needing to relocate closer to their new place of work. 

This relief supports the principle that employment opportunities should not be hindered by the potential financial impact of relocation, ensuring that moving for work is accessible and less burdensome for employees.

Transfers Involving Public Bodies – SDLTM25000

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

Transfers Involving Public Bodies Relief exempts SDLT for property transactions between public organisations, aiding in public service and infrastructure development without tax costs.

This relief applies to land transactions involving public bodies, facilitating the transfer of property without the burden of SDLT in specific circumstances.

Explanation: The relief is designed for transactions where public bodies, such as government departments or local authorities, are either transferring or acquiring land. 

It aims to exempt such transactions from SDLT to support public service delivery and infrastructure development without additional tax costs.

Examples Where This Relief Can Be Applied with Calculations:

  • Example: A local government transfers a piece of land valued at £2 million to another public body for the purpose of constructing a new school. Ordinarily, this transaction might incur an SDLT of £89,500 (using standard non-residential SDLT rates). With this relief, the transaction would be exempt, resulting in a benefit of £89,500 for the public bodies.

Why the Relief Has Been Put in Place:

To facilitate the efficient transfer of property between public bodies for public good, ensuring that tax implications do not hinder the development of infrastructure or the delivery of public services.

Reorg of Parliamentary Constituencies – SDLTM25500

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

Relief for transfers due to parliamentary constituency reorganisation exempts SDLT, supporting boundary adjustments without financial barriers.

This relief is specific to land transactions that occur as a direct result of the reorganisation of parliamentary constituencies.

Explanation: When parliamentary constituencies are reorganised, properties may need to be transferred between different public bodies to align with new boundaries. This relief ensures such transactions are not subject to SDLT, aiding in the smooth transition and reorganisation process.

Examples Where This Relief Can Be Applied:

  • Example: A property within a constituency undergoing boundary changes is transferred from one local authority to another, valued at £500,000. Normally, this could result in an SDLT liability. However, with this relief, the transaction is exempt, facilitating the reorganisation without additional costs.

Why the Relief Has Been Put in Place: To support the administrative changes required by the reorganisation of parliamentary constituencies, ensuring that such necessary adjustments are not impeded by financial constraints from SDLT liabilities.

Acquisition by Bodies Established for National Purposes – SDLTM26500

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

This relief exempts bodies like museums and charities from paying SDLT on property purchases, helping them focus resources on their public service missions.

This relief applies to SDLT on property acquisitions by bodies established for national purposes, such as museums and certain charitable organisations.

Explanation: The relief recognises the unique role and financial constraints of national institutions and charities in acquiring properties for their operations. It exempts eligible acquisitions from SDLT, supporting these bodies in fulfilling their national importance and public interest missions.

Examples Where This Relief Can Be Applied with Calculations:

  • Example: A national museum acquires a new property for an expansion, valued at £3 million. Under standard conditions, this might incur an SDLT of £139,500. This relief would exempt the transaction, allowing the museum to allocate more resources towards its public service objectives.

Why the Relief Has Been Put in Place: To assist bodies established for national purposes in acquiring properties necessary for their operations without the financial burden of SDLT, acknowledging their contribution to the cultural, educational, and charitable landscape of the country.

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Right to Buy Relief SDLTM27000

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

Right to Buy Relief under SDLTM27000 offers SDLT advantages for affordable homeownership schemes, allowing eligible transactions to pay tax on discounted prices or specific scheme terms, supporting easier access to property ownership.

Right to Buy Relief under SDLTM27000 encompasses a range of reliefs specifically designed for transactions involving right to buy, shared ownership leases, rent-to-shared ownership lease schemes, rent to mortgage, and rent to loan transactions, as outlined in FA03/S70 and FA03/SCH9.

Explanation: This relief package is aimed at facilitating affordable homeownership through various schemes. It includes mechanisms to limit SDLT liability for eligible transactions, ensuring that the chargeable consideration reflects the discounted purchase price or complies with specific affordable housing scheme provisions. 

Notably, for shared ownership schemes, the relief allows for SDLT payment on a market value election basis or on the actual transaction parts, with exemptions for certain staircasing transactions.

Examples Where This Relief Can Be Applied with Calculations:

  • Right to Buy: A tenant purchasing their council home for £320,000 with a market value of £1800,000 would pay SDLT on the £180,000 discounted price rather than the higher market value.
  • Shared Ownership: Purchasing a 50% share of a property valued at £800,000 for £400,000, the buyer could opt to pay SDLT on just the £400,000 share or make a market value election to pay SDLT on the total £800,000 value, potentially avoiding further SDLT on future staircasing.

Why the Relief Has Been Put in Place: These reliefs were established to support affordable homeownership initiatives, making it financially easier for individuals to buy their homes through government schemes. 

By adjusting SDLT liabilities to reflect discounted prices or offering favourable terms for shared ownership transactions, the legislation aims to remove financial barriers to homeownership, aligning with broader housing policy objectives to increase access to the property market.

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Diplomatic Privileges (SDLTM20500) Sovereign & International Orgs (SDLTM20600)

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

Diplomatic and sovereign bodies enjoy SDLT relief on UK property transactions to support international relations and fulfil the UK’s legal obligations, exempting them from tax to facilitate their operations in the country.

These reliefs are designed to exempt certain transactions from Stamp Duty Land Tax (SDLT) involving diplomatic entities, sovereign bodies, and international organisations, reflecting the UK’s commitment to international diplomacy and legal obligations under international law.

Explanation

  • Diplomatic Privileges Relief (SDLTM20500): This relief exempts diplomats and certain members of international organisations from SDLT on properties purchased in the UK, provided the individual is not a UK national and the property is for their own or their mission’s use.
  • Sovereign Bodies and International Organisations (SDLTM20600): Similar to the diplomatic relief, this exempts purchases made by sovereign states or international organisations themselves, rather than individuals, from SDLT, acknowledging their sovereign or quasi-sovereign status.

Examples Where This Relief Can Be Applied:

  • A diplomat from another country, not a UK national, purchases a residential property in London for £750,000. Normally, the SDLT could be around £25,000 (using standard rates as an example). However, with diplomatic privileges relief, the SDLT due is £0.
  • An international organisation recognised under international law purchases office space in the UK for £2 million. Without the relief, SDLT could be approximately £89,500 (considering non-residential rates). The relief reduces the SDLT to £0.

Why the Relief Has Been Put in Place: These reliefs support the UK’s international obligations and diplomatic relationships. 

They recognise the unique status of diplomatic missions and international organisations, facilitating their operation within the UK by reducing the financial burden of SDLT. 

This, in turn, helps to foster international cooperation and respect for diplomatic and sovereign immunities and privileges as outlined in international treaties and agreements.

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Freeport Relief — England SDLTM20200

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

Freeport relief reduces SDLT on land in designated freeport zones in England to boost economic activity, requiring the land be used in qualifying manners until 30 September 2026.

Freeport relief offers SDLT relief for certain acquisitions of land and buildings within designated freeport tax sites in England, as outlined under Schedule 6C of the Finance Act 2003.

Explanation: This relief is designed to support economic activity within freeport tax sites by offering SDLT relief on land intended and actually used in a qualifying manner within these zones. 

The relief is available for purchases from the date a freeport tax site’s designation takes effect until 30 September 2026. The intended and actual use of the land, rather than its nature at the time of purchase, determines eligibility for relief. The control period during which the land must be used in a qualifying manner is important for maintaining the relief.

Examples Where This Relief Can Be Applied:

  • A company purchases land within a designated freeport tax site for £2 million, intending to use it for manufacturing, which qualifies for Freeport relief. Without the relief, assuming non-residential SDLT rates, the SDLT would be £89,500. With Freeport relief, the SDLT due could be significantly reduced or eliminated, provided the land is used in a qualifying manner.
  • Joint purchasers acquire mixed-use land for £3 million in a freeport tax site, intending to develop part of it as commercial premises (qualifying use) and the other part for residential development. The SDLT relief would apply to portions of the land used in qualifying manners, potentially reducing SDLT costs by tens of thousands.

Why the Relief Has Been Put in Place: Freeport relief aims to stimulate investment, economic growth, and job creation within designated freeport tax sites by reducing the upfront cost burden of SDLT on eligible land acquisitions. 

By incentivising businesses to develop and operate within these zones, the relief supports the government’s broader economic development goals, fostering innovation and trade in strategically important areas. 

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Other Relief (Including Seeding Relief) & Combination of Reliefs SDLTM21000

(SDLT Classifications, Reliefs and Exemptions>All Other Reliefs)

 

Special SDLT reliefs, like seeding relief for property funds and combinations for mixed-use developments, offer tax benefits for diverse transactions, making property transfers into investment vehicles more financially viable.

Other reliefs, including seeding relief, along with combinations of reliefs, offer a broad spectrum of tax planning opportunities. These categories accommodate various specific scenarios not covered by more commonly applied reliefs.

Explanation: These reliefs provide flexibility and efficiency in SDLT liability management for diverse and complex property transactions. “Seeding relief” is particularly relevant to property funds or partnerships, facilitating the initial transfer of properties into a collective investment vehicle without incurring prohibitive SDLT charges. 

Combination of reliefs allows for tailored tax treatment of transactions that meet the criteria for more than one relief, optimising the tax benefits.

Examples Where This Relief Can Be Applied with Calculations:

  1. Seeding Relief for Property Funds: A property developer transfers several properties worth £10 million into a real estate investment trust (REIT). Without seeding relief, the SDLT could be £500,000 (assuming an average 5% rate). With seeding relief, the SDLT charge could be significantly reduced or deferred, depending on the specific conditions met.
  2. Combination of Reliefs for Mixed-Use Developments: A purchase involving both residential and commercial elements (e.g., a building with shops on the ground floor and flats above) might qualify for both Multiple Dwellings Relief (MDR) and non-residential rates. The combined relief application could lower the overall SDLT liability more effectively than applying a single relief.

Why the Relief Has Been Put in Place:

These reliefs are designed to support the real estate market’s liquidity and investment, encouraging the establishment and growth of property funds and partnerships by making it financially viable to transfer properties into these vehicles. 

They also recognise the complexity of certain transactions that don’t neatly fit into single-relief categories, offering a more nuanced approach to SDLT that reflects the diversity of property use and ownership structures.

 

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Written by Land Tax Expert Nick Garner.
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