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HMRC SDLT: SDLTM29500 – Reliefs: Arrangements involving public or educational bodies

Stamp Duty Land Tax Relief for Public and Educational Bodies: SDLTM29500

Overview of FA03/SCH4/PARA17

The legislation FA03/SCH4/PARA17 provides partial relief from Stamp Duty Land Tax (SDLT) for specific arrangements that involve public or educational bodies. These bodies, known as qualifying bodies, fit the definition established in FA03/SCH4/PARA17(2).

Conditions for Relief

The relief applies when the following conditions are met:

– A qualifying body (let’s call it Body A) transfers land or grants a lease to a non-qualifying body (let’s refer to it as Body B).
– In return for this transfer (known as “the main transfer”), Body B grants Body A a lease of the same land, or a significant portion of it (this is known as “the leaseback”).
– Body B agrees to perform specific works or provide services to Body A.
– Part of the payment by Body A to Body B for these works or services is in cash.

It’s important to note that the transfer or lease of any additional land (referred to as “surplus land”) from Body A to Body B does not affect the application of this relief.

Understanding Main Transfer and Surplus Land

– The terms “main transfer” and “surplus land” are crucial for understanding the transactions involved. The main transfer generally is the initial transaction where Body A gives land to Body B.
– Surplus land refers to any extra land transferred or leased that is separate from the main transfer.

These transactions can occur within a single lease or transfer. For example, if Body A leases land to Body B, this lease could count as both the main transfer for part of that land and the transfer of surplus land for any remaining part.

Exclusions from Chargeable Consideration

When the above arrangements are in place, the following can occur:

– The leaseback, the works carried out by Body B for Body A, and the services provided by Body B to Body A are not considered when calculating chargeable consideration for either the main transfer or any surplus land transfer.
– Essentially, this means that SDLT is usually only applied on any cash premium or rent paid by Body B.

When looking at the reverse situation:

– The main transfer, the transfer of any surplus land, and any payments made by Body A to Body B for works or services are not regarded as chargeable consideration for the leaseback.
– Therefore, generally, there will be no SDLT applicable for the leaseback.

Exchange Provisions and Market Value

Typically, SDLT provisions concerning exchanges require tax to be computed based on the market value of what is received. However, these provisions do not apply to:

– the main transfer
– the transfer of surplus land
– the leaseback

This means that the standard rules for computing tax based on market value are not applicable in these cases.

Eligibility of Qualifying Bodies

Qualifying bodies include:

– The government
– Local authorities
– Educational institutions such as schools and universities
– Charitable organisations that are established for particular public benefits

It is essential for the bodies involved to understand whether they qualify for this relief, as it directly affects the financial implications of their land transactions.

Examples of Transactions Involving Relief

To illustrate these concepts, let’s consider a straightforward example.

Example 1: Local Authority and Community Centre

1. A local authority (Body A) decides to transfer a piece of land enabling it to build a community center.
2. The local authority transfers this land to a community group (Body B), a non-qualifying body.
3. As part of the deal, the community group agrees to provide the local authority with a lease for the community center (the leaseback).
4. The community group also agrees to undertake certain renovations on the property.
5. The local authority pays a cash amount to the community group for these renovations.

In this scenario, the community group’s leaseback and renovations are not considered chargeable for the purposes of SDLT on the land transfer. Therefore, the tax may only apply to any cash premium or rent paid by the community group, and no SDLT will be levied on the leaseback.

Example 2: University and Research Facility

1. A university (Body A) owns land on which it wants to build a new research facility.
2. The university grants a lease of the land to a private research company (Body B).
3. As part of the arrangement, the private company grants a leaseback to the university for the research facility.
4. The company will also provide ongoing maintenance and service support to the university’s facility.
5. The university pays the company for these services in cash.

In this scenario, similar to the first example, the leaseback, maintenance work, and service provision by the company are excluded from chargeable consideration for the main transfer of land, significantly reducing the SDLT due.

Documentation and Record-Keeping

It is vital for both qualifying and non-qualifying bodies to maintain comprehensive documentation of the transactions. Such documentation should include:

– Details of the main transfer
– The leaseback agreement
– Any agreements related to works or services
– Records of any cash payments made

Maintaining accurate records ensures that both parties comply with SDLT regulations and helps clarify the financial aspects should any questions arise from HMRC.

HMRC Guidance and Further Information

For additional details regarding the exact definitions, eligibility criteria, and specific clauses relating to Stamp Duty Land Tax relief for qualifying bodies, parties involved in such transactions should refer to HMRC guidance. This guidance provides vital information and clarifies how relief procedures function, helping avoid potential pitfalls during property transactions.

You can access additional HMRC information here: General HMRC Guidance on SDLT