HMRC SDLT: Guidelines for Deferring Tax Payment on Contingent or Uncertain Land Transactions

Deferring Tax Payment for Contingent or Uncertain Consideration

This section outlines the procedure for deferring tax payment under FA03/S90 when dealing with contingent or uncertain consideration in land transactions. If an application to defer tax is approved, specific terms and conditions must be adhered to. The notice of acceptance will detail the tax amount due, relevant event dates, and how tax should be calculated. It’s crucial that all information provided is accurate and complete, as any false information or undisclosed facts can nullify the application. Changes in circumstances can also affect the validity of the application.

• The notice of acceptance specifies the terms for deferring tax payment.
• It includes the tax amount payable for the initial land transaction return.
• Relevant event dates must be clearly outlined.
• Instructions on how to calculate tax on those dates are provided.
• False information or undisclosed facts can invalidate the application.
• Changes in relevant circumstances can also affect the application’s validity.

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Procedure for Deferring Payment of Tax on Land Transactions

This article explains how to defer the payment of tax related to land transactions when it involves uncertain or contingent consideration. It’s important to understand the steps and conditions associated with making an application for deferral to HM Revenue & Customs (HMRC).

What is Contingent or Uncertain Consideration?

Contingent or uncertain consideration usually refers to situations where the final amount to be paid in a transaction cannot be determined at the time of the transaction. For example:

• If a buyer purchases a piece of land but the final sale price depends on future developments or market conditions, this situation may fall under contingent consideration.
• Another instance can be when additional payments are dependent on future earnings from a property, which means the total tax payment also depends on these uncertain factors.

How to Apply for Deferring Tax Payment

If you find yourself in a situation where you need to defer the payment of tax due to contingent or uncertain consideration, you must apply to HMRC. Here are the key points regarding the application process:

• Submission: You need to submit your request to defer payment along with your initial land transaction return.
• Details Required: Your application must be clear and contain specific details. Ensure you maintain accurate information, as any misleading details can affect the outcome.

Terms of Acceptance

If HMRC approves your application to defer the tax payment, you will receive a notice of acceptance. This notice will include:

• Terms of Acceptance: Clearly defined conditions regarding your approval for deferring the payment.
• Tax Amount: The notice must specify the amount of tax due according to the initial land transaction return.
• Relevant Dates: Important dates related to the transaction must be mentioned, such as when the transaction occurred and when payment should be made.
• Tax Calculation: Instructions must be included on how the tax will be calculated based on the mentioned dates.

Impact of Providing False Information

It is essential to provide truthful information when making your application. If it is found that:

• Your application contains false information, or
• You have not disclosed facts that would significantly impact the application,

then the acceptance of your application will be void, meaning you cannot defer your payment.

Changes in Relevant Facts and Circumstances

Your application may also become ineffective if there are changes in the facts or circumstances that were relevant to your deferment request. Examples include:

• If the conditions under which the initial sale value was set change, such as a significant shift in property value or additional unexpected fees,
• If further developments or agreements alter the expected payments or the conditions of the transaction.

In such cases, you must inform HMRC about these changes as they may affect whether you can continue to defer your tax payments.

Maintaining Accurate Records

Keeping thorough records of your transaction is key when deferring your tax payment. Your records should include:

• The original agreement of sale and any amendments made thereafter.
• Correspondence with HMRC, including your deferment application and their acceptance notice.
• Documentation supporting the basis of any contingent payments, such as reports or agreements from third parties.

Next Steps After Deferral Application Approval

Once your application to defer payment is accepted by HMRC, you need to:

• Monitor the relevant dates as outlined in the notice of acceptance.
• Prepare for the calculation of the tax due based on the criteria specified in the acceptance notice.
• Stay informed about any changes in your circumstances that might require you to update HMRC.

Potential Penalties

Be careful about your compliance with the conditions laid out in the acceptance notice. Failure to adhere to these might lead to penalties, such as:

• Fines for late payment if the tax is due but not paid.
• Potential legal action for breach of the terms agreed upon in your acceptance notice.

Conclusion on the Procedure

This procedure is vital for anyone dealing with real estate transactions involving inconsistent future payments. Ensure that you remain transparent and comply with all the guidelines set out by HMRC to avoid complications. Always consult with a professional if you are unsure about any aspect of the deferral process or its requirements.

For more detailed information on this and other related topics, it can be beneficial to refer to additional HMRC resources and guidelines.

For further assistance, refer to SDLTM50940 – Procedure: Deferring payment in case of contingent or uncertain consideration FA03/S90: Terms of acceptance.

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