HMRC SDLT: SDLTM09764 – SDLT – higher rates for additional dwellings: joint purchasers – Para 2(3) Sch 4ZA FA2003
SDLT Higher Rates for Additional Dwellings
This section of the HMRC internal manual explains the principles and concepts related to the higher rates of Stamp Duty Land Tax (SDLT) for additional dwellings, specifically focusing on joint purchasers. It provides guidance under Paragraph 2(3) of Schedule 4ZA of the Finance Act 2003.
- Details the application of higher SDLT rates for additional properties.
- Explains the implications for joint purchasers.
- Clarifies relevant legislative references and conditions.
- Offers procedural guidance for HMRC staff.
Read the original guidance here:
HMRC SDLT: SDLTM09764 – SDLT – higher rates for additional dwellings: joint purchasers – Para 2(3) Sch 4ZA FA2003
Understanding Higher Rates of SDLT for Joint Purchasers
When two or more people buy a property together, known as joint purchasers, specific rules apply regarding Stamp Duty Land Tax (SDLT). One significant aspect of these rules is the application of higher rates of SDLT. This article explains when these higher rates come into play for joint purchasers.
When Higher Rates Apply
Higher rates of SDLT will apply in the following cases:
- If the transaction would be subject to higher rates for any of the joint purchasers when considered individually.
- If a spouse or civil partner of any of the joint purchasers would qualify for higher rates if they were a purchaser themselves.
To delve deeper into the conditions that determine this, you can refer to SDLTM09770 and the following sections.
Conditions for Higher Rates
To understand whether higher rates apply, we need to consider certain conditions, identified as A to D. These conditions check if either the joint purchasers or their spouses/civil partners would be liable for higher rates had they been the sole purchasers. Here is a brief overview of these conditions:
- Condition A: Considers whether the purchaser owns any other property.
- Condition B: Looks at whether the purchaser will be purchasing an additional property.
- Condition C: Evaluates the status of the purchaser in terms of ownership of more than one dwelling.
- Condition D: Checks if the purchaser’s spouse or civil partner would also be purchasing the property.
It’s important to understand that these conditions apply irrespective of the way the interest in the property is held. Whether the purchasers are joint tenants (together as owners) or tenants in common (holding separate shares), the same rules apply.
What Counts as a Joint Purchaser?
It’s essential to know who qualifies as a joint purchaser under SDLT regulations. According to HMRC guidelines, an individual who is not a spouse or civil partner of any purchaser can still be a joint purchaser. However, there are specific criteria:
- If they have absolutely no beneficial interest in the property, they are not considered a joint purchaser for SDLT purposes.
- This lack of beneficial interest must be documented in writing.
A beneficial interest means having rights to the profits from the property, income generated by it, or the right to live in it. If the person is entitled to any of these, they are deemed to have a beneficial interest, making them a joint purchaser.
Practical Example
To illustrate how these rules work in practice, consider the following scenario:
Let’s say there are two friends, Tom and Sarah, planning to buy a flat together. Tom already owns a house, while Sarah is a first-time buyer. Because Tom owns another property, the higher rates would apply to both of them when purchasing the flat.
Now, imagine that Tom is married to Lucy. Lucy does not have an interest in the flat, and if she were a purchaser, she would also be deemed to have a beneficial interest. In this case, because Tom qualifies for the higher rates, it means both he and Sarah would face higher SDLT on their joint purchase.
Documentation Requirements
If one purchaser is not considered a joint purchaser because they lack beneficial interest, it’s vital to have written documentation that clearly states this. This written declaration should specify their role and confirm that they will not receive any income, capital proceeds, or occupancy rights in connection with the property.
Conclusion
In summary, understanding when higher rates of SDLT apply for joint purchasers is vital for anyone involved in buying property together. Whether due to the individual circumstances of joint purchasers or their spouses/civil partners, it’s important to consider every factor that might qualify the transaction for higher rates.
The specific rules around beneficial interest and associated documentation further clarify who is subject to these higher rates. If there’s any uncertainty, seeking professional guidance is advisable, as these rules can impact the overall cost of purchasing property.
For further information and guidance on SDLT rules, refer to the relevant HMRC publications.