HMRC SDLT: SDLT Higher Rate Exemption for Qualifying Property Rental Businesses Explained
Stamp Duty Land Tax: Higher Rate Charge for Non-Natural Persons
This summary explains when the higher rate charge for Stamp Duty Land Tax (SDLT) applies to acquisitions of residential property by certain non-natural persons. Specifically, it focuses on property rental businesses and the conditions under which the higher rate charge is exempted.
- The 17% higher rate charge does not apply if the property is acquired solely for generating rental income in a qualifying property rental business.
- SDLT will be charged at higher rates instead, with more details available in the SDLT manual.
- A further return and additional SDLT payment may be necessary if specific rules on withdrawal of relief are applicable.
- To qualify, the property rental business must meet conditions outlined in Chapter 2 of Part 4, CTA 2009, excluding corporation tax chargeability.
- The business must operate on a commercial basis with the intention of making a profit.
“`
Read the original guidance here:
HMRC SDLT: SDLT Higher Rate Exemption for Qualifying Property Rental Businesses Explained
Understanding Stamp Duty Land Tax (SDLT) and Higher Rates for Property Purchases
What is Stamp Duty Land Tax (SDLT)?
Stamp Duty Land Tax (SDLT) is a tax that you pay when you purchase a property or land in the UK. The amount of SDLT you owe generally depends on the price you pay for the property. However, different rules apply if the property is bought in certain situations, such as by a company or for specific business purposes.
When Does the Higher Rate of SDLT Apply?
In some cases, there is a higher rate of SDLT that applies to certain purchases. This higher rate can be as much as 15%. The following sections will explain how and when this higher rate is charged, particularly for non-natural persons, such as companies.
Acquisitions by Non-Natural Persons
A non-natural person typically refers to companies or other corporate entities. For these kinds of buyers, the standard rules for SDLT might not apply in the usual way. The higher rate of 15% applies when a non-natural person purchases residential property unless specific conditions are met.
Exemption from the Higher Rate
If a non-natural person acquires a property only to use it as a source of rental income or other receipts through a qualifying property rental business, they may not have to pay the higher rate of 15%. Instead, they would pay the standard higher rates.
Example of Exemption
– A property management company buys a block of flats solely to rent them out to tenants. Since the acquisition is intended exclusively for rental income, this acquisition would not incur the 15% higher rate, but the company would pay the standard higher SDLT rates.
Conditions to Qualify for the Exemption
For an acquisition to be eligible for the exemption from the 15% higher rate, the following conditions must be met:
1. The Business Type
– It must be classified as a property rental business. This classification is detailed in Chapter 2 of Part 4, CTA 2009. Note that the requirement for profits to be subject to corporation tax does not apply in this case.
2. Commercial Basis
– The business must operate on a commercial basis, meaning it should be run in a way that aims to make a profit.
Example of Non-Qualifying Business
– A company that buys residential properties to flip them for profit does not qualify for the exemption because it does not operate as a rental business focused solely on generating rental income. Therefore, any SDLT owed would be at the higher 15% rate.
Additional SDLT Requirements
If a transaction is not exempt from the higher rate charge, then additional SDLT might be required after the initial payment if certain rules apply. For more details regarding these circumstances, further guidance can be found in the section on Withdrawal of Relief (SDLTM09660).
Understanding Property Rental Businesses
It is essential to grasp what constitutes a property rental business. The characteristics of a qualifying property rental business include:
– The primary focus on renting out properties rather than selling them.
– Engaging in this activity with the intention of making a profit.
– Operating in a manner consistent with rental businesses generally.
Points to Remember
– A property rental business is defined under specific tax laws and does not require profits to be taxed as corporation tax for the exemption to apply.
– If an acquisition fits within the definition of a qualifying property rental business, it can avail of the exemption from the higher rates.
Resources for Further Guidance
For those looking for additional information about compliance with SDLT and its requirements, consider referring to the following resources:
– For details on when SDLT is charged and how it may be affected by the higher rate for non-natural persons, see SDLTM09835.
– For regulations surrounding the Withdrawal of Relief, refer to Withdrawal of Relief (SDLTM09660).
By understanding these principles and guidelines, buyers can better navigate the complexities of SDLT, especially when considering properties for rental purposes.
Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLT Higher Rate Exemption for Qualifying Property Rental Businesses Explained
