HMRC SDLT: SDLTM09220 – The chargeable consideration: Section 75A (1)(c)

SDLTM09220 – The Chargeable Consideration: Section 75A (1)(c)

This section of the HMRC internal manual provides guidance on the chargeable consideration under Section 75A (1)(c) of the Stamp Duty Land Tax. It outlines the principles and concepts related to the tax implications and calculations involved.

• Explains the criteria for determining chargeable consideration.
• Details the tax implications of transactions under Section 75A.
• Provides examples to illustrate the application of the rules.
• Offers guidance on compliance and reporting requirements.

Understanding Chargeable Consideration Under Section 75A (1)(c)

Introduction

This guidance explains the concept of chargeable consideration in relation to notional transactions under Section 75A (1)(c). It aims to simplify how chargeable consideration is determined and offers practical examples to illustrate key points.

What is Chargeable Consideration?

Chargeable consideration refers to the total value involved in a transaction that will be taken into account when calculating stamp duty land tax (SDLT). For a notional transaction, you need to look at the greatest value either:

– Given by any one person for the transactions that are part of the scheme.
– Received by ‘V’ (the seller) or anyone connected to ‘V’ for the scheme transactions.

Key Principles

1. Determining Chargeable Consideration:
– The chargeable consideration is essentially the maximum amount that one party has either paid or is supposed to receive from the other party involved in the transaction scheme.
– This means you should assess both the payments made and the amounts received to find the highest figure.

2. Corporation Tax Act Reference:
– Section 1122 of the Corporation Tax Act 2010 comes into play when figuring out who is ‘connected’ with ‘V’. This section provides definitions and guidance on relationships that may affect how chargeable consideration is calculated.

3. Money’s Worth:
– Chargeable consideration isn’t only about cash payments. It includes any assets or services that have a monetary value. This is often referred to as ‘money’s worth.’
– For example, if a person receives a property valued at £200,000 instead of cash for a transaction, this would also count as chargeable consideration.

Considerations for Notional Transactions

When calculating chargeable consideration for notional transactions, consider the following factors:

– The overall amount given or received.
– The relationship between the parties involved and any relevant connections.
– The monetary value of non-cash considerations.

Examples to Illustrate Chargeable Consideration

To better understand how to determine chargeable consideration, let’s look at some examples:

1. Example One:
– ‘Person A’ pays ‘Person B’ £100,000 for a piece of land. In this case, the chargeable consideration is straightforward: it is £100,000, as it is the highest amount given for the transaction.

2. Example Two:
– ‘Person C’ sells a property to ‘V’ for £250,000, but ‘V’ also transfers a vehicle worth £50,000 to ‘Person C’ as part of the transaction. Here, the chargeable consideration becomes £250,000, since that is the highest amount given or received in cash.

3. Example Three:
– In a complex arrangement, ‘Person D’ agrees to purchase ‘V’s’ property for £300,000 but also agrees to take on a debt of £100,000 that ‘V’ owes. In this case, the chargeable consideration for the notional transaction is £300,000 because it is the largest sum involved in the financial exchange.

Understanding Connections Under Section 1122

The term ‘connected’ is important when determining chargeable consideration. Section 1122 helps clarify who might be considered connected to ‘V’.

– A connected person can include relatives, business partners, and other parties linked through financial or familial ties.
– For example, if ‘V’ and ‘Person E’ are business partners, any transactions between the two would require careful analysis concerning chargeable consideration, as they are ‘connected.’

Money’s Worth Explained

When we say “money’s worth,” it signifies that any benefit received as part of a transaction has value that will count towards the chargeable consideration.

– Example: If ‘V’ receives shares worth £50,000 instead of cash during a transaction, that figure adds to the chargeable consideration, making it an important factor in the overall calculation.

Related Transactions and Further Provisions

There are rules concerning incidental transactions that provide additional context to chargeable consideration. If you engage in incidental transactions related to the main scheme transaction, you may need to consider these effects.

– SDLTM09240 onwards: This section provides information about incidental transactions. These are any additional transactions that may take place alongside your main transaction and could influence the total consideration amount.

– SDLTM09270 onwards: This outlines supplementary provisions which could impact the consideration for a notional transaction. It’s important to refer to these sections to ensure you have accounted for all potential influences on the calculation.

Interactions with Other Statutory Provisions

When handling chargeable consideration under Section 75A, it’s important to be aware that other statutory provisions may also apply. For instance:

– Capital Gains Tax: Understanding how this interacts with SDLT can help clarify your overall tax obligations.
– Value Added Tax (VAT): In some cases, VAT may play a role in how you assess the value of a transaction, and you must factor this in as well.

Practical Advice for Calculating Chargeable Consideration

– Start by gathering all relevant information about the transaction.
– Identify the highest cash amount exchanged and any other forms of value received.
– Review connections under Section 1122 to identify any related parties that might change your assessment.
– Include the monetary values of any non-cash items as part of your considerations.
– If needed, consult with a tax professional for more complex transactions.

Conclusion

Understanding chargeable consideration in relation to notional transactions can be complex. However, by breaking down the key principles and examples, one can navigate the calculation more easily. Be sure to review all relevant provisions and consider the complete financial picture for accurate assessment. For more in-depth guidance on related topics, always refer to the appropriate SDLT resources available or consult a professional.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09220 – The chargeable consideration: Section 75A (1)(c)

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