HMRC SDLT: SDLTM09620 – 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: dwellings for occupation by certain employees and partners FA03/SCH4A/PARA5D

Principles and Concepts of SDLT Higher Rate Charge

This section of the HMRC internal manual discusses the higher rate charge of Stamp Duty Land Tax (SDLT) applicable to acquisitions of residential property by certain non-natural persons. It focuses on the conditions under which this charge is levied, specifically for dwellings intended for occupation by certain employees and partners.

• Explains when SDLT higher rate is applicable.
• Details the criteria for non-natural persons.
• Outlines exemptions for employee and partner occupation.
• References relevant legislative provisions (FA03/S55/SCH4A).

Understanding the Higher Rate of Stamp Duty Land Tax (SDLT) for Non-Natural Persons

Introduction to the Higher Rate of SDLT

Stamp Duty Land Tax (SDLT) is a tax you may need to pay when you purchase property in the UK. For certain non-natural persons, which typically means businesses or companies, a higher rate of SDLT may apply when they acquire residential property. This article explains when and how this higher rate is charged, specifically for properties that will be used as accommodation for employees or partners of the business.

Higher Rate Charge Overview

Normally, the higher rate of 15% SDLT may not apply if certain conditions are met. When the conditions are fulfilled, SDLT will be charged at the standard higher rate for additional dwellings instead. However, a further return and payment of additional SDLT might still be required if specific rules about relief apply (see Withdrawal of relief (SDLTM09675)).

Conditions to qualify for lower SDLT rates

In order to avoid the 15% higher rate, the property purchase must meet the following criteria:

• Commercial Intent: The purchaser, or a member of the relevant group, must be running a trade with the aim to make a profit.
• Use of Property: The dwelling is to be provided as accommodation exclusively to qualifying employees or partners.
• Business Purpose: The property must be mainly used for the trading activities conducted by the purchaser or a relevant member of the group.

Who qualifies as an employee or partner?

It’s important to note that specific employees or partners do not need to be identified when the purchase takes place. The property’s use by others, such as family members of the qualifying employee or partner, will not affect the exemption from the 15% rate, provided they occupy the dwelling because of their relationship to the employee or partner.

Ownership and Examples

Certain businesses may own residential properties for the purpose of providing accommodation to their employees. Here’s an example:

– A multinational corporation may own a flat in London that offers temporary housing for employees from international branches who are in the UK for business. This can include employees visiting for short durations or those who have been temporarily relocated.

This kind of arrangement satisfies the criteria because:

– The business is operating with a view to profit.
– The accommodation is provided to employees as part of their work assignment.
– The main purpose of the property is for business-related use.

Understanding the Holding Structure

The rules for relief also consider what is known as the ‘holding structure’ of the property. This looks at how the property is owned and the types of individuals who are allowed to occupy it.

Relevant Group Member

If the person purchasing the property is a company, a ‘relevant group member’ would be any company that belongs to the same SDLT group. For further details on what constitutes an SDLT group, you can refer to SDLTM23020.

Providing Living Accommodation

The property must be designated for the use of ‘qualifying employees’ or ‘qualifying partners’ specifically for living purposes. The idea is that the accommodation is directly linked to the business’s operations and is intended for those who are actively engaged in the business.

What Qualifies as a ‘Qualifying Employee’ or ‘Partner’?

– Qualifying Employees: These are employees who are working for the company and who the property is intended to support while they perform their job functions.
– Qualifying Partners: These might include business partners who also require accommodation in connection with their trade.

In summary, the exemptions from the 15% higher SDLT charge depend on the property’s intended use, the relationship to trade activities, and the identification of relevant employees or partners.

It’s essential to keep these definitions clear to ensure compliance with SDLT regulations.

Residential Properties for Mixed Use

If a dwelling is being used for purposes other than just accommodation for the qualifying employees or partners but is still largely connected to the business’s operations, it may still qualify for the lower SDLT rates. This can include properties that have some level of residential use but serve a primarily business objective.

For example, a company that owns a house that functions partly as an employee’s residence while also serving as a space for meetings or client hosting may still meet the requirements as long as the primary aim is for business benefit.

Conclusion

While examining your SDLT obligations, understanding these criteria is vital for determining whether higher rates apply to your property acquisition. Remember to assess your business purpose and how the property will primarily be used to ensure you follow the rules correctly.

With the complex nature of property transactions, it can be beneficial to seek professional advice if you’re unsure about how SDLT may affect your purchase.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09620 – 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: dwellings for occupation by certain employees and partners FA03/SCH4A/PARA5D

View all HMRC SDLT Guidance Pages Here