HMRC SDLT: SDLTM09610 – Scope: when is Stamp Duty Land Tax (SDLT) chargeable: higher rate charge for acquisitions of residential property by certain non-natural persons FA03/S55/SCH4A: opportunity to the public to enjoy etc.

Principles and Concepts of SDLT Chargeability

This section of the HMRC internal manual explains the conditions under which Stamp Duty Land Tax (SDLT) is chargeable, specifically focusing on the higher rate charge for acquisitions of residential property by certain non-natural persons. It outlines the relevant legislation and provides guidance on public enjoyment opportunities.

SDLT is applicable to property acquisitions by non-natural persons.
Higher rates may apply under specific conditions.
Guidance is based on FA03/S55/SCH4A legislation.
Public enjoyment opportunities are considered in tax assessments.

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Read the original guidance here:
HMRC SDLT: SDLTM09610 – Scope: when is Stamp Duty Land Tax (SDLT) chargeable: higher rate charge for acquisitions of residential property by certain non-natural persons FA03/S55/SCH4A: opportunity to the public to enjoy etc.

Understanding Stamp Duty Land Tax (SDLT) Chargeable Events

Stamp Duty Land Tax (SDLT) is a tax applied when you buy property in the UK. This article explains when SDLT is chargeable, particularly focusing on higher rates for certain non-natural entities, such as companies. One of the key points covered here is the requirement for a property to be made available to the public for at least 28 days in a calendar year to qualify for certain tax reliefs.

Public Availability of Property

To meet the criteria for SDLT relief, the property must be genuinely accessible to the public on 28 different days in each calendar year. However, it is important to note that the property does not need to actually host events on all 28 days. What matters is that people can access it.

Examples of Public Access

If you have a house that serves as a wedding venue, and you make it available for hire every Friday and Saturday, even if you only hold 20 weddings in that year, you still satisfy this requirement. The key is that the opportunity to use the venue was available every week.

Access During the Year

If the property is not available for the full 28 days in a given year—perhaps because it is only opened or used partway through the year—you could still qualify for this relief. This is true as long as:

There is a clear intention to make the property available for at least 28 days in following years.
Steps were taken earlier in the year to ensure it was opened to the public.

Meaning of ‘Public’

When discussing public access, the standard understanding of the term ‘public’ applies. This means the opportunity to use the property should be genuinely available to everyone, although reasonable business considerations can be factored in.

Limitations on Access

If the property is only available to people who are closely connected to the owner, or if access is only granted through personal invitations, this does not fulfill the public availability requirement. In these situations, it would not count as being available to the public.

Exceptions for Connected Persons

However, if a connected person uses the property as a regular member of the public, rather than solely because of their connection to the owner, they are considered to be a member of the public for the purposes of meeting SDLT criteria.

Key Concepts Regarding Higher Rates for Non-Natural Persons

It is also essential to understand the higher SDLT rates that can apply when non-natural persons—such as companies or partnerships—purchase residential properties. These rates are generally higher than those applied to individuals. The following conditions and principles are important in this context:

Types of Non-Natural Persons

Non-natural persons include companies, partnerships, and other entities that are not considered individuals.
When purchasing residential property, these entities often face an additional charge on the SDLT.

Residential Properties

For residential properties, the SDLT implications differ significantly based on whether the buyer is an individual or a non-natural person. Non-natural persons must pay a higher rate of SDLT, which is generally 3% more than the standard rates for individuals.

Understanding Chargeable Events

SDLT becomes chargeable when a non-natural person acquires a residential property. This charge applies regardless of how the property is used in the future, whether for personal, investment, or commercial purposes.

Conditions for Claiming SDLT Relief

Non-natural persons may be able to claim relief from the higher rates if they satisfy specific conditions. These include:

The property must be available to the public for hire or use.
The intended use of the property should reflect genuine commercial activity.

Regular Public Availability

Even if a property is not rented out every day, as long as it is regularly listed for public use, this condition can be met. For instance, if a property is advertised as a holiday rental for certain months of the year, and this advertisement is visible to the public, it can count toward the requirements for opening to the public.

Business Considerations

While making the property public might require some business considerations, any limitations imposed must still allow for broad access. If a property is marketed primarily to friends or family and not widely to the public, then it does not meet the SDLT criteria.

Common Misunderstandings

It is common for buyers, especially those who are non-natural persons, to be confused about their SDLT liability regarding residential property purchases. Here are a few points to clarify:

Non-natural persons are often assumed to be taking advantage of tax loopholes. However, SDLT is designed to ensure they pay their fair share.
Understanding when a property is truly public-facing is key to determining tax obligations.

Implications of Not Meeting Requirements

If the conditions for SDLT relief are not met, non-natural persons can end up facing significantly higher tax bills. This highlights the importance of careful planning before purchasing residential properties.

Practical Steps to Ensure Compliance

To avoid issues with SDLT on property purchases, non-natural persons should take the following practical steps:

Ensure the property is available to the public and can be demonstrated through advertisements, bookings, or public interest.
Keep records of all efforts to make the property available and any public engagement efforts made throughout the year.
Consult with tax advisors who understand SDLT regulations and can provide tailored advice for your specific situation.

Future Considerations

Successful applications for SDLT relief depend on demonstrating a clear intention and ability to meet the public availability criteria in future years. Continuous planning and strategic engagement with potential customers can also help maintain compliance with SDLT rules.

Useful Resources and Links

For more detailed information on SDLT regulations, including the context around higher rates for non-natural persons, refer to SDLTM09610 which covers these subjects comprehensively.

Understanding these principles can simplify SDLT compliance and help avoid unexpected costs during property transactions. Being informed ensures your property’s use aligns with tax obligations, particularly for non-natural buyers. Engaging publicly and preparing well will help facilitate future transactions and tax planning.