HMRC SDLT: SDLTM22010 – Reliefs: Compulsory purchase facilitating development

Reliefs: Compulsory Purchase Facilitating Development

This section of the HMRC internal manual provides guidance on reliefs related to compulsory purchase orders that facilitate development. It outlines the principles and concepts involved in such reliefs.

• Explains the criteria for qualifying for reliefs under compulsory purchase orders.
• Details the process of applying for these reliefs.
• Describes the legal framework governing compulsory purchase and related reliefs.
• Provides examples of scenarios where reliefs may be applicable.

Stamp Duty Land Tax Relief for Compulsory Purchase Orders

Overview of Relief from Stamp Duty Land Tax

In England, when a property or land is acquired through a compulsory purchase order, the buyer may be eligible for relief from Stamp Duty Land Tax (SDLT). This relief applies specifically when the purpose of the purchase is to allow for development by a third party.

Who Can Claim This Relief?

To qualify for the relief, the purchaser must be the same entity that initiated the compulsory purchase order. Generally, this entity is the local planning authority (LPA), which is responsible for planning and municipal matters in a specific area.

Subsequent Transfers and Tax Implications

Once the chargeable interest has been purchased with the relief applied, any further transfer of that interest to the third party will be subject to the regular Stamp Duty Land Tax rules. This means that while the initial purchaser might benefit from relief, any future transactions involving the property may incur tax obligations.

Effect of Agreements on Relief Eligibility

It is important to note that the relief will still apply even if the compulsory purchase is part of an agreement between the seller and a third party, provided that other eligibility conditions are met. Here’s how it works:

– If the vendor (the seller) agrees to sell the property and has already settled on a price with a third party.
– The subsequent sale to the entity that made the compulsory purchase order must be formalised through a compulsory purchase order.
– The existence of an agreement concerning the terms of sale does not prevent the purchaser from claiming the relief.

This means that as long as the compulsory purchase process is followed, any prior agreement on price between the vendor and a third party does not disqualify the purchaser from seeking relief.

Understanding Development by a Third Party

For the relief to be granted, it is essential that the property is purchased specifically to enable development by a third party. The term ‘development’ is defined under Section 55 of the Town and Country Planning Act 1990. According to this definition, development refers to the following activities:

– Building new structures, such as houses, offices, or shops
– Making changes to existing structures
– Excavating or making other significant alterations to the land

In simpler terms, if a third party intends to enhance the property or land in a meaningful way, such as constructing new buildings or making major improvements, this qualifies as development.

Eligibility Conditions for Relief

When seeking relief from Stamp Duty Land Tax, it is necessary to fulfil certain conditions:

– The initial buyer must be the entity that made the compulsory purchase order.
– The purpose of the purchase must be to facilitate the development of the land by a third party.
– The property must be charged with a compulsory purchase order.

Each of these criteria needs to be met to successfully claim the relief from SDLT.

Examples of Compulsory Purchase Situations

To illustrate how this process and relief might work in practice, consider the following scenarios:

Example 1: A local planning authority identifies a piece of land that is crucial for a new infrastructure project, such as a road. The authority issues a compulsory purchase order to acquire the land. After purchasing the land, the authority enables a private developer to build a new housing estate on that site. In this instance, the local authority can claim relief from Stamp Duty Land Tax because the purchase was made to facilitate development by a third party.

Example 2: A council is presented with an opportunity to buy land that has been designated for public park development. They enter into an agreement with a landscape architect who plans the development of the park. Here, the council can again claim relief when they purchase the land because they made the compulsory purchase order to enable the landscape architect to carry out the development.

Important Considerations Related to Development

While seeking relief for a compulsory purchase related to third-party development, purchasers should keep several key points in mind:

– The scope and nature of the intended development must be concrete and well-defined.
– Details surrounding the developer’s plans should be carefully documented, as they may need to be presented as part of the relief claim.
– All stages of the compulsory purchase and subsequent transactions should be in accordance with local planning laws and guidelines.

Conclusion on Legislative Compliance

When navigating this process, it’s crucial for purchasers to adhere closely to local laws governing compulsory purchases and Stamp Duty Land Tax. This includes understanding any regional variations in regulations, as compliance is essential for a successful claim for relief.

In summary, ensuring awareness of the legislative environment and documenting all agreements related to the purchase can facilitate a smoother experience for obtaining SDLT relief, whilst supporting urban development initiatives effectively.

While this article provides an overview, for detailed guidance or specific scenarios related to your situation, it is advisable to consult a tax professional or refer directly to the relevant HMRC provisions online for more comprehensive information.

For detailed information, please refer to the following link: SDLTM22010 – Reliefs: Compulsory purchase facilitating development.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM22010 – Reliefs: Compulsory purchase facilitating development

View all HMRC SDLT Guidance Pages Here