HMRC SDLT: SDLTM09640 – 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: farmhouses FA03/SCH4A/PARA5F

Principles and Concepts of SDLT Higher Rate Charge

This section of the HMRC internal manual explains the conditions under which the higher rate of Stamp Duty Land Tax (SDLT) is applicable for residential property acquisitions by certain non-natural persons. It specifically focuses on the regulations outlined in FA03/S55/SCH4A, with a particular emphasis on farmhouses as per FA03/SCH4A/PARA5F.

• SDLT higher rate applies to non-natural persons acquiring residential property.
• Regulations are detailed in FA03/S55/SCH4A.
• Specific focus on farmhouses under FA03/SCH4A/PARA5F.
• Guidance is part of HMRC’s internal manual.

Understanding When Higher Stamp Duty Land Tax (SDLT) Applies to Non-Natural Persons

Stamp Duty Land Tax (SDLT) is a tax paid when you buy property or land over a certain price in England and Northern Ireland. For some buyers, a higher rate of SDLT applies, especially when it concerns additional dwellings. This article explains when the higher rate charge is not applied, particularly regarding non-natural persons, such as companies or trusts.

Key Principles of Higher Rate SDLT Charges

The standard higher rate of SDLT comes into play in various situations, especially for additional properties. However, specific conditions allow for exceptions, which we will clarify below.

• Higher rate SDLT charge: Generally, if multiple properties are acquired, the higher SDLT rates for additional dwellings will apply.
• Non-natural persons: Entities such as companies or trusts fall under this category.
• Exceptions to the rule: There are circumstances when the higher rate charge will not apply, especially if the property being bought is a farmhouse used for farming purposes.

Conditions for Exemption from Higher Rate SDLT Charge

In certain situations, buyers can avoid the higher rate charge. The property involved must meet specific requirements. For it to qualify for the exemption, the following conditions must be satisfied:

• Use for Farming: The farmhouse must be used for a qualifying trade of farming. This means it should be occupied by a qualified farm worker, someone engaged in farming as part of their employment.
• Commercial Plans: There should be clear and reasonable commercial plans regarding how the farming trade will continue. If the farming operation is about to start, plans must be well-prepared to ensure there’s no delay.
• Regular Occupation: The farmhouse must be reasonably expected to be occupied by the farm worker regularly, as part of the farming activity.

Importance of the Farmhouse’s Location

The location of the farmhouse is vital in determining if the higher rate charge is applicable. Here are the key points to remember:

• If the farmhouse is included in the land occupied for farming activities, the higher rate will not apply.
• If the farmhouse is detached or located separately from the land where farming occurs, the higher rate charge will be due, regardless of the employment of a farm worker.

Example of Higher Rate SDLT Application

Let’s say a limited company purchases a farmhouse and adjacent farmland. For the exemption to the higher rate charge to be applicable, the following must happen:

• One of the company’s employees, a farm worker, occupies the farmhouse.
• There are established farming operations with solid commercial plans to continue the farming business.
• The farm worker is expected to live and work in the farmhouse as part of their farming duties.

If all these conditions are met, the company will not need to pay the 15% higher rate SDLT charge. Instead, they will pay the standard higher SDLT rates for additional dwellings.

Withdrawal of Relief and Additional SDLT Payment

It is essential to be aware that if certain rules laid out under Withdrawal of Relief apply, the buyer may be required to submit a further return and make an additional SDLT payment. Here’s what that means:

• If the property situation changes after purchase, such as the farmhouse no longer being occupied by a farm worker for farming purposes, buyers could lose their relief from the higher rate.
• In such cases, they would need to inform HMRC and pay the additional SDLT that would apply. This is crucial to avoid any penalties or issues with compliance.

Summary of Key Takeaways

When dealing with SDLT and higher rates for non-natural persons, there are specific conditions involving the use of farmhouses and associated farmland. Ensure that you:

• Check whether the farmhouse will be used for a qualifying trade of farming.
• Understand the plans in place for the farming operations to show ongoing viability.
• Keep in mind the importance of occupation by a farm worker as it relates directly to the applicability of higher SDLT rates.

Remember that if the property situation changes, additional SDLT may be required, so staying informed and adhering to all guidelines from Withdrawal of Relief (SDLTM09680) is vital.

For more detailed guidance on specific scenarios concerning SDLT, feel free to visit the relevant pages or seek expert advice from tax professionals to ensure compliance with all regulations.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09640 – 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: farmhouses FA03/SCH4A/PARA5F

View all HMRC SDLT Guidance Pages Here