HMRC SDLT: SDLTM31610 – Application: Bodies registered under the Co-operative & Community Benefit Societies Act 2014
Principles and Concepts of SDLTM31610
This section of the HMRC internal manual provides guidance on the application of tax rules for bodies registered under the Co-operative & Community Benefit Societies Act 2014. It covers the following principles and concepts:
- Eligibility criteria for registration under the Act.
- Tax implications and benefits for registered bodies.
- Compliance requirements and reporting obligations.
- Procedures for maintaining registration status.
Read the original guidance here:
HMRC SDLT: SDLTM31610 – Application: Bodies registered under the Co-operative & Community Benefit Societies Act 2014
Guidance on Stamp Duty Land Tax and Co-operative & Community Benefit Societies Act 2014
This article explains certain aspects of the Stamp Duty Land Tax (SDLT) as they relate to bodies registered under the Co-operative & Community Benefit Societies Act 2014. It highlights when SDLT applies and when it does not, focusing on specific transactions that are exempt from this tax.
Understanding Stamp Duty Land Tax (SDLT)
Stamp Duty Land Tax (SDLT) is a tax that is typically charged on property purchases in the UK. However, not every transaction involving property will incur this tax. Certain types of transactions are exempt, which is important to understand, especially for co-operative and community societies.
What is the Co-operative & Community Benefit Societies Act 2014?
The Co-operative and Community Benefit Societies Act 2014 came into effect on 1 August 2014. This act replaced the earlier Industrial and Provident Societies Act 1965. It provides a legal framework for the registration and operation of co-operative societies and community benefit societies, which are types of organisations that are owned and run by their members for mutual benefit.
Exempt Transactions Under the Act
Under the Co-operative & Community Benefit Societies Act 2014, certain transactions do not qualify as land transactions for SDLT purposes. This means that these transactions are exempt from the tax. The specific transactions that do not incur SDLT include:
- Registration of a society under section 2: When a new society is officially registered, this process does not involve a land transaction.
- Amalgamation of societies under section 109: If two or more societies join together, this amalgamation does not count as a land transaction for tax purposes.
- Transfer of engagements under section 110: When a society transfers its obligations and responsibilities to another society, this action is also exempt from SDLT.
- Conversion of a society into, or amalgamation with, a company under section 112: If a society changes its legal status to become a company or merges with a company, this conversion does not attract SDLT.
- Conversion of a company into a society under section 115: When a company transforms into a society, this process is similarly exempt from SDLT.
Regulations Supporting Exemptions
The exemptions mentioned above are backed by the Mutual Societies (Transfers of Business) (Tax) Regulations 2009. These regulations provide the framework that ensures these transactions are not liable for Stamp Duty Land Tax.
What This Means for Societies
For societies registered under the Co-operative & Community Benefit Societies Act 2014, understanding these exemptions is essential. This knowledge helps organisations recognise when they can operate without the added burden of SDLT costs during their structural changes or registrations. It allows them to focus on their community and cooperative goals without the fear of unexpected tax liabilities.
Examples for Clarity
Here are a few illustrative examples to help clarify how these exemptions apply:
Example 1: Registration of a New Society
Imagine a group of individuals who wish to form a co-operative to run a community market. They complete the legal requirements and register their society under section 2 of the Co-operative & Community Benefit Societies Act 2014. Since the registration process does not involve buying or selling property, no Stamp Duty Land Tax will apply.
Example 2: Amalgamation of Societies
Suppose two existing societies, one focused on food production and the other on local crafts, decide to merge to improve their community impact. They follow the process outlined in section 109 of the Act to amalgamate. This transaction is exempt from SDLT, allowing them to combine their resources without incurring additional tax costs.
Example 3: Transfer of Engagements
Consider a society that has decided to transfer its responsibilities and obligations to another existing society that is better equipped to handle its projects. Following the procedures in section 110, this transfer will not incur SDLT, ensuring that both societies can continue their work efficiently.
Example 4: Conversion to a Company
A society might find that converting into a company would allow it to operate more effectively under a different business model. If it chooses to do so under section 112, that conversion will not be subject to Stamp Duty Land Tax, which can make the transition smoother and more cost-effective.
Example 5: Conversion from Company to Society
In a case where a local business operates as a company but wishes to convert to a societal format to enhance community ties, it can do so under section 115. Since this conversion is exempt from SDLT, it can change its structure without facing additional tax burdens.
Important Considerations
While these outlines of exemptions are helpful, societies should still be aware of several important considerations:
- Proper Legal Guidance: Even though these transactions are exempt from SDLT, it is essential to seek legal advice to ensure all other relevant legal requirements are met.
- Documentation: Proper documentation should be maintained for all transactions to demonstrate compliance and reinforce the legitimacy of the exemption claims.
- Other Tax Implications: While SDLT may not apply, there could be other tax implications related to such transactions, so it is advisable to consult with tax professionals.
- Regulatory Compliance: Ensure that all actions align with the established rules under the Co-operative & Community Benefit Societies Act 2014.