HMRC SDLT: Guide on Non-Chargeable Costs in Property Transactions and Tax Obligations

Understanding Chargeable Consideration in Property Transactions

This guidance explains which costs are considered chargeable consideration in property transactions. While some costs paid by the purchaser on behalf of the seller are chargeable, certain costs are treated differently under specific legislation and circumstances.

  • Costs under compulsory purchase legislation, such as those under the Compulsory Purchase Act 1965, are not chargeable consideration.
  • Payments related to inheritance tax on property transferred as a gift or through a will are not considered chargeable consideration.
  • Capital gains tax liabilities from non-arm’s length property transfers are not chargeable unless other considerations apply.
  • Tenant payments for a landlord’s reasonable costs in lease transactions are not chargeable consideration.
  • Obligations for tenants to surrender Single Farm Payment entitlements to landlords are not chargeable consideration.

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SDLTM03710 – Scope: How Much is Chargeable: Costs Not Treated as Chargeable Consideration

When someone buys property, they often pay for certain services or costs that may include legal fees or other expenses incurred by the seller. However, not all these payments are considered chargeable for Stamp Duty Land Tax (SDLT). This section explains specific costs that are not classified as chargeable consideration under current regulations.

Costs Not Counted as Chargeable Consideration

  • Some costs that the buyer pays on behalf of the seller are viewed as chargeable consideration. These include things like the seller’s legal fees.
  • However, there are certain costs, detailed in this guidance, that are treated differently and are not counted as chargeable consideration.

Costs Under Compulsory Purchase Legislation

According to specific laws regarding compulsory purchase, certain costs are not considered chargeable for SDLT:

  • Compulsory Purchase Act 1965: Fees or payments made under Section 23 of this act are excluded from chargeable consideration.
  • Land Compensation Act 1961: Any compensation claims for disturbances or other issues that are not directly tied to the value of the property, as outlined under Section 5(6), are also not chargeable consideration.

Payment of Inheritance Tax

When property is transferred as a gift or through a will, the recipient may become responsible for paying inheritance tax. However, this potential tax obligation does not count as chargeable consideration. Key points include:

  • The transfer of property can lead to a liability for inheritance tax for the individual receiving the property.
  • This liability or agreement for inheritance tax does not factor into the chargeable consideration when calculating SDLT.

Payment of Capital Gains Tax

Similarly, if a person receives property as a gift or in a situation that is not part of an arm’s length transaction, they may be liable for capital gains tax. Here are the important details:

  • The laws state that potential liabilities or agreements regarding capital gains tax are not counted as chargeable consideration.
  • However, if there are other fees or payments that are chargeable consideration, this exclusion will not apply.

Cost of Landlord’s Expenses

Tenants sometimes agree to pay their landlord for reasonable costs associated with leasing transactions. This payment is not treated as chargeable consideration in the following circumstances:

  • Payments made by tenants for their landlord’s reasonable costs when renewing or extending a lease are excluded. More details about this can be found in SDLTM11060.

Surrender of Single Farm Payment Entitlement

In agricultural leasing situations, there is often a requirement for the tenant to give up their rights to the Single Farm Payment when their tenancy ends. The regulations state that:

  • The requirement to surrender this entitlement does not count as chargeable consideration.
  • This means that even though the tenant is giving up a potential payment to the landlord, this action does not affect the SDLT calculation.

Understanding which costs are not classified as chargeable consideration is important for accurately calculating SDLT and ensuring compliance with regulations. By being aware of these exclusions, buyers, sellers, and tenants can better navigate the complexities of property transactions.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: Guide on Non-Chargeable Costs in Property Transactions and Tax Obligations

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