HMRC SDLT: SDLTM20240 – Freeports and Investment Zones relief – relief for ancillary land (para 3(3))

Principles and Concepts of Freeports and Investment Zones Relief

This section of the HMRC internal manual provides guidance on the relief available for ancillary land within Freeports and Investment Zones. It outlines the specific conditions under which relief can be claimed, as per paragraph 3(3).

  • Explains the eligibility criteria for claiming relief on ancillary land.
  • Details the types of investments that qualify for this relief.
  • Clarifies the procedural steps for applying for the relief.
  • Provides examples to illustrate the application of these rules.

SDLTM20240 – Freeports and Investment Zones Relief – Relief for Ancillary Land (Paragraph 3(3))

This section explains how relief can be claimed for certain pieces of land that are considered ancillary. Ancillary land is land that supports or adds value to other land that already qualifies for tax relief under specific circumstances related to Freeports and Investment Zones. Here’s what you need to know about this process.

What is Ancillary Land?

Ancillary land is defined as land that is used in a way that supports other land that qualifies for relief. For this land to receive relief, it must be linked to a primary piece of land that is located in a designated area known as a special tax site, and it must be used in an acceptable manner. The main points to remember include:

  • Connection to Qualifying Land: The ancillary land must serve a necessary role in supporting the primary land.
  • Qualifying Uses: It must be used in a manner that meets the requirements for relief.

Examples of Ancillary Use

To clarify what constitutes ancillary use, here are some examples:

  • Warehouse Access Road: A road that provides direct access to a warehouse is auxiliary to that warehouse. It helps facilitate the operation of the warehouse, making it essential for its functionality.
  • Car Park for a Factory: A designated car park that serves employees and visitors of a factory is also considered ancillary. The car park ensures that people can access the factory easily, thus supporting its operations.
  • Landscaping Around an Office Block: Landscaping that is integral to the design and functionality of an office block qualifies as ancillary. It enhances the environment and usability of the office space.

Each of these examples illustrates how ancillary land plays a supportive role. Without this support, the primary land would be less effective or functional in its intended use.

Key Conditions for Relief

Simply having a piece of land does not automatically make it eligible for relief as ancillary land. There are specific conditions that must be met:

  • Necessary Support: The land must be used in a way that is essential to support the qualifying land. If the use of the land does not contribute to this support, it will not qualify.
  • Exclusions Apply: Certain types of use do not qualify for relief. For example, if the land is used as a dwelling, such as a caretaker’s flat, it typically will not qualify for relief. This is because the use as a home does not provide necessary support for commercial or industrial activities.

Understanding Relief Under Specific Rules

One important rule to be aware of is the 100% relief rule mentioned in the related guidance of SDLTM20280. Under this rule:

  • Relief may be granted under certain conditions if land is used in a manner recognised in the relevant legislation.
  • However, if the caretaker’s flat does not meet the conditions for this 100% relief, it cannot be classified as ancillary land, as residential use is explicitly excluded.

This rule demonstrates that the purpose and nature of the land’s use are critical in determining whether it qualifies for ancillary land relief.

Implications of Incorrect Claims

Claiming relief for ancillary land that does not meet these guidelines can lead to issues. It’s essential to accurately assess the use of any land before submitting a relief claim. The key implications of incorrect claims include:

  • Potential Financial Penalties: If relief is claimed improperly, it might lead to penalties imposed by HMRC, including repayment of relief granted incorrectly.
  • Extra Administrative Work: Correcting an erroneous claim can create additional administrative burdens, requiring more paperwork and time.

Special Tax Sites and Qualifying Uses

To understand how to claim relief effectively, it’s important to identify what constitutes a special tax site. These sites typically include Freeports and Investment Zones, characterised by:

  • Encouragement of Economic Growth: These areas are designed to stimulate investment and economic activity in specific regions.
  • Tax Benefits: Within these sites, businesses often enjoy reduced rates or complete exemptions from certain taxes, making them attractive for investment.

Therefore, any land that falls within such a site and is used appropriately can be assessed for relief as ancillary land.

Seeking Professional Guidance

Given the complexities involved in determining whether a piece of land qualifies as ancillary, seeking professional advice is recommended. This could include:

  • Consulting Tax Professionals: Tax advisors familiar with HMRC guidelines can provide clarity on whether a piece of land qualifies for relief.
  • Legal Assistance: Lawyers who specialise in property and tax law can help ensure that all requirements are understood and adhered to.

Using professional guidance can clarify your position and help prevent any mistakes in your claims.

Documenting Your Claims

Proper documentation is vital when claiming relief for ancillary land. Essential documentation includes:

  • Proof of Use: Keeping records that demonstrate how the land is used supports the claim that it is ancillary.
  • Location Evidence: Showing that the land is within a designated special tax site is critical.
  • Clear Justification: Providing a rationale for why the land is necessary for the support of the primary land.

Failure to provide adequate documentation can lead to complications in the claim process or challenges from HMRC.

Summary of Key Considerations

In summary, when considering relief for ancillary land, the following key points should be remembered:

  • Relationship to Qualifying Land: Ensure that the ancillary land is directly supportive of land qualifying for relief.
  • Correct Use: Identify the correct uses that qualify for relief and avoid excluded uses.
  • Documentation: Maintain good records to justify claims.
  • Seek Professional Help: When in doubt, consult with experts to guide you through the process.

For more detailed information or specific queries, you can refer to the guidance provided under the relevant codes, such as SDLTM0000.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM20240 – Freeports and Investment Zones relief – relief for ancillary land (para 3(3))

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Written by Land Tax Expert Nick Garner.
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