HMRC SDLT: Understanding ‘Involved in Connection With’ for Stamp Duty Land Tax Transactions
Understanding ‘Involved in Connection With’ in SDLT Transactions
This section explains the concept of transactions being ‘involved in connection with’ the disposal and acquisition of a chargeable interest under Section 75A(1)(b) of the Stamp Duty Land Tax (SDLT) regulations. It outlines how certain transactions are classified as scheme transactions and provides guidance on determining their involvement.
- Transactions between V and P that transfer a chargeable interest are considered scheme transactions.
- Transactions that set the context for P acquiring V’s chargeable interest may also be scheme transactions.
- Transactions affecting the SDLT payable can be part of scheme transactions.
- A transaction is not automatically involved just because it is part of a series; its necessity for achieving the sequence’s outcome is key.
- Commercially interdependent transactions are likely to be involved in connection with the disposal and acquisition.
- Factors like planning, relationship to the chargeable interest, proximity, and intent are crucial in determining involvement.
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Read the original guidance here:
HMRC SDLT: Understanding ‘Involved in Connection With’ for Stamp Duty Land Tax Transactions
Understanding ‘Involved in Connection With’ for Scheme Transactions
This page was created on 15 January 2020 and updated on 14 May 2021.
What Are Scheme Transactions?
Scheme transactions occur during the exchange of a chargeable interest between parties involved, generally referred to as V (the seller) and P (the buyer). Specifically, these transactions relate to the disposal of V’s chargeable interest and the acquisition of that same interest, or one derived from it, by P. For detailed information about scheme transactions, refer to SDLTM09170.
Examples of Relevant Transactions
Various types of transactions might fall under the category of scheme transactions if they influence the transfer of chargeable interest. Here are key examples:
- Transactions affecting transfer: Any transactions directly affecting how the chargeable interest is transferred from V to P may count as scheme transactions.
- Contextual transactions: Transactions that provide context for P acquiring V’s chargeable interest, or a related interest, are likely to be included as well.
- SDLT implications: If a transaction influences the amount of Stamp Duty Land Tax (SDLT) payable, it is likely a scheme transaction.
Determining Connection in Transactions
A transaction does not automatically qualify as ‘involved in connection with’ just because it exists within a series of transactions. However, if a particular transaction step is essential for achieving the overall outcome of a series, it will likely meet the connection test. Therefore, this transaction will be considered part of the processes that facilitate the transfer of V’s chargeable interest, or an interest derived from it, to P.
Commercial Interdependence
When two or more transactions rely on each other to succeed, they are likely to be seen as involved in the disposal and acquisition of the chargeable interest. Such interdependent actions contribute to the understanding of scheme transactions.
Factors to Consider for Scheme Transactions
When figuring out if a transaction counts as a scheme transaction, it is important to consider the complete facts surrounding how P acquires the chargeable interest. The following factors should be taken into account:
- Planning involved: Think about the planning that went into the transaction. What was the intent behind the planning?
- Step relevance: Evaluate how this particular step relates to the disposal and acquisition of the chargeable interest.
- Proximity of steps: Look at how close together the transaction steps are in time and purpose. Are they occurring in quick succession, or is there a substantial delay between them?
- Reasons for particular steps: Consider why each step was carried out and the overall intention behind them. What was the goal of the transaction?
It is through these considerations that one can correctly assess whether a transaction is ‘in connection with’ the disposal and acquisition of a chargeable interest.
Conclusion of Assessment
As we explore the principles behind the connection in transactions, it is clear that understanding the broader context and individual details will help in determining if a transaction constitutes a scheme transaction. Paying attention to the specific factors at play ensures accurate outcomes in relation to Stamp Duty Land Tax obligations.
Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: Understanding ‘Involved in Connection With’ for Stamp Duty Land Tax Transactions
