HMRC SDLT: SDLTM27010 – Reliefs: Right to buy transactions, shared ownership leases etc: Definition of right to buy FA03/SCH9/PARA1

Principles and Concepts of Right to Buy Transactions

This section of the HMRC internal manual provides guidance on the reliefs available for right to buy transactions and shared ownership leases under FA03/SCH9/PARA1. It outlines the definitions and criteria necessary for these transactions to qualify for reliefs.

  • Explains the concept of right to buy transactions.
  • Details shared ownership leases.
  • Defines the criteria for qualifying for reliefs.
  • Provides legal references under FA03/SCH9/PARA1.

Definition of Right to Buy Transactions

A right to buy transaction involves specific types of property sales or lease grants by certain public sector organisations, usually at a discount. This can happen in two main situations:

  • The sale of a home at a discounted price by an approved public sector body.
  • The granting of a lease on a home at a discount by an appropriate public sector body.

Who is Considered a Relevant Public Sector Body?

The term ‘public sector body’ refers to various groups that have the authority to carry out these transactions. Here are the main types:

Government Bodies

  • A Minister of the Crown
  • The Scottish Ministers
  • A Northern Ireland Department

Local Government Authorities

  • A local housing authority as defined by the Housing Act 1985
  • A county council in England
  • A council in Scotland as per the Local Government etc (Scotland) Act 1994
  • A district council according to the Local Government Act (Northern Ireland) 1972

Social Housing Organisations

  • The Housing Corporation
  • Scottish Homes
  • The Northern Ireland Housing Executive
  • A registered social landlord
  • A housing action trust established under the Housing Act 1988

New Towns and Development Corporations

  • The Commission for the New Towns
  • A development corporation created under the New Towns Act 1981
  • A development corporation established under the New Towns (Scotland) Act 1968
  • A new town commission from the New Towns Act (Northern Ireland) 1965
  • An urban development corporation set up under the Local Government, Planning and Land Act 1980
  • The Welsh Development Agency

Police Authorities

  • A police authority described in the Police Act 1996
  • A police authority stated in the Police (Scotland) Act 1967
  • The Northern Ireland Policing Board

Other Bodies

  • An Education and Libraries Board from the Education and Libraries (Northern Ireland) Order 1986
  • The United Kingdom Atomic Energy Authority
  • Any body designated by Treasury order for specific purposes

Preserved Right to Buy Transactions

Another situation falls under the preserved right to buy. This applies in two key cases:

  • The vendor is someone in England or Wales whose right to buy is preserved under Part 5 of the Housing Act 1985.
  • In Scotland, it refers to a person protected under section 61 of the Housing (Scotland) Act 1987.

For a transaction to qualify under this preserved right:

  • The purchaser must be eligible based on the preserved right.
  • The property being bought must meet the eligibility criteria connected to the purchaser.

Understanding Chargeable Consideration

In the context of a right to buy transaction, if the vendor is a registered social landlord, some financial aspects change:

  • Section FA03/S51(1) regarding contingent consideration is not applicable in right to buy transactions.
  • Chargeable consideration excludes any payment tied to potential future events (contingencies). For example, if a certain condition needs to be met before additional payments are made, those future payments are not counted as part of the chargeable amount.

To clarify what this means practically, if you were buying a home under a right to buy scheme, any grants related to purchasing the property at a discount from a registered social landlord do not factor into the total amount that would be charged for stamp duty.

Examples of Transactions

Let’s consider some practical examples to illustrate the points made so far:

Example 1: A local authority sells a home to a tenant at a price substantially lower than the market rate. This transaction would count as a right to buy, as it is a sale of a dwelling at a discount by a relevant public sector body.

Example 2: A tenant in Scotland purchases their home from a registered social landlord at a reduced price because they are exercising their preserved right to buy under the Housing (Scotland) Act. Since the social landlord is the vendor, the sale proceeds as a right to buy transaction.

Example 3: If a police authority sells a property at a discount to a qualified buyer, that transaction qualifies as a right to buy because it falls under a relevant public sector body’s responsibilities.

Example 4: A local housing authority sells a flat to a tenant at a price that is less than the market value, and this is done in compliance with the relevant housing laws. This would also be a right to buy transaction, and the same rules about chargeable consideration would apply.

Exceptions and Specific Details

For these right to buy transactions, it is vital to remember that not every detail or possible payment is counted when determining what tax is owed. This includes crucial aspects like:

  • Any contingent payments that might usually feature in the pricing structure are not included.
  • If a property is sold with a grant in place for the discount from a registered social landlord, it will also be excluded from the overall chargeable amount for margins like stamp duty.

This simplifies the financial understanding for those involved in right to buy transactions, ensuring they know precisely what will and won’t count when it comes to calculating any charges connected to their purchase.

Final Thoughts on Right to Buy Transactions

Understanding the definition and specifications of right to buy transactions is essential for buyers and professionals in the housing market. By knowing who the relevant public sector bodies are and what qualifies as a transaction, buyers can navigate the process more effectively. Additionally, being aware of how chargeable consideration is calculated helps in planning for any associated costs. The rules surrounding preserved rights to buy further clarify the eligibility of both vendors and purchasers in these significant transactions.

SDLTM27010 – Reliefs: Right to buy transactions, shared ownership leases etc: Definition of right to buy FA03/SCH9/PARA1

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