HMRC SDLT: SDLTM09615 – 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: financial institutions acquiring dwellings in the course of lending FA03/SCH4A/PARA5C

Principles and Concepts of SDLT Higher Rate Charge

This section of the HMRC internal manual discusses the application of the higher rate Stamp Duty Land Tax (SDLT) charge. It focuses on acquisitions of residential property by certain non-natural persons, such as financial institutions, in the course of lending. The key principles and concepts include:

  • Definition of non-natural persons in SDLT context.
  • Criteria for higher rate SDLT charge applicability.
  • Exemptions and specific scenarios under FA03/SCH4A/PARA5C.
  • Guidance on compliance and reporting requirements.

Understanding the Higher Rate for Stamp Duty Land Tax (SDLT)

In certain situations, when a property is bought, the higher rate of Stamp Duty Land Tax (SDLT) may be charged. However, if specific conditions are met, a transaction could be exempt from the 15% higher rate charge. This article outlines when SDLT is applicable at the higher rates for additional dwellings, particularly for non-natural persons. It also describes the financial institutions involved in such transactions.

Conditions for the 15% Higher Rate Charge

The 15% higher rate charge will not apply if the transaction meets certain conditions. Instead, SDLT will be calculated at the higher rates that are used for additional properties. However, you need to be aware that if the conditions for Withdrawal of relief (SDLTM09670) come into effect, a further return and payment of additional SDLT will be required.

What is Required for Higher Rates on Additional Dwellings

To qualify for SDLT to be charged at the higher rates for additional dwellings, the following conditions must be satisfied:

  • The transaction must involve a higher threshold interest (property) that is acquired as part of a financial institution’s lending business.
  • The property acquired must be for the purpose of resale as part of that lending business.
  • The transaction must occur in connection with the lending activities of the financial institution.

What is a Financial Institution?

A financial institution, in the context of SDLT, is defined in section 564B of the Income Tax Act 2007. However, it does not include persons as specified in section 564B(1)(d). This latter group refers to individuals or businesses licensed under Part 3 of the Consumer Credit Act 1974 to conduct consumer credit or consumer hire operations.

Types of Financial Institutions

Examples of entities that fall under the definition of a financial institution include:

  • Banks: Traditional banking establishments that provide a range of financial services.
  • Building Societies: Organisations owned by their members, offering savings accounts and mortgages.
  • Wholly-owned subsidiaries: Companies that are fully owned by banks or building societies.
  • Bond-issuers: Institutions that issue bonds as a means of lending money.
  • Entities authorised outside the UK: These include organisations that can receive deposits and grant credit in other jurisdictions.
  • Insurance Companies: Firms that provide insurance products and are authorised to operate.
  • Entities authorised outside the UK for insurance business: Especially for those involved in similar insurance contracts.

However, it is important to note that not every entity is classified as a financial institution for SDLT purposes. For instance, an insurance special purpose vehicle does not fall under this category (see CFM44030 for details on special purpose vehicles).

What to Do If You Are Unsure

If there is any uncertainty about whether an entity qualifies as a financial institution for SDLT charge purposes, you should reach out to the Technical Team at HMRC Stamp Taxes. For more information, you can find their contact address on the HMRC website.

Key Points to Remember

Here are some important takeaways regarding SDLT and the higher rates for non-natural persons:

  • The higher rate charge of 15% does not apply if the transaction meets the specified conditions.
  • For SDLT to be charged at the higher rates concerning additional dwellings, the property must be linked to a financial institution’s business activities, specifically related to lending.
  • If a financial institution is acquiring property for resale in line with their lending activities, the higher rate will typically apply.
  • Entities must be verified to ascertain if they fit the definition of a financial institution, particularly if they operate outside the UK.

It is essential for all parties involved in property transactions, especially financial institutions, to be aware of these rules and ensure compliance to avoid unexpected charges or penalties. Make sure to review the relevant legislation and seek assistance if needed.

Resources and Additional Information

For further clarification and to access detailed guidance on SDLT and related matters, visit the HMRC site. Staying informed about changes in laws and regulations concerning Stamp Duty is crucial for effective tax planning. Being proactive in understanding these rules will ensure smooth transactions and help avoid unforeseen issues related to property purchases.

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