HMRC SDLT: Guidance on Completing SDLT1 Forms for Linked Property Transactions
Guidance on Completing SDLT1 Forms for Linked Transactions
This guide provides detailed instructions for completing SDLT1 forms, specifically focusing on linked transactions. It explains how to handle situations where multiple transactions are connected, such as those involving family members or controlled companies, and how to calculate the appropriate tax. An example illustrates the process using a scenario where a husband and wife purchase different parts of a property.
- Linked transactions involve parties connected by family or business control.
- Aggregate the total consideration for all linked transactions, excluding rent.
- Apply the correct tax rate to the total aggregated amount.
- Example: Jack and Jill’s purchases are treated as linked, affecting their tax calculations.
- Both Jack and Jill’s forms reflect the aggregated consideration of £260,000.
- Late filing penalties are added to the calculated tax on both returns.
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Read the original guidance here:
HMRC SDLT: Guidance on Completing SDLT1 Forms for Linked Property Transactions
Further Guidance for Completing Forms SDLT1: Linked Transactions
Understanding Linked Transactions
When dealing with land transactions, it’s essential to understand the concept of linked transactions. Linked transactions occur when two or more transactions are considered as one for Stamp Duty Land Tax (SDLT) purposes. This means that the total consideration (the money exchanged) for these transactions is combined when calculating the SDLT due.
Who is Considered to be ‘Connected’?
Certain relationships define how transactions can be linked. A person is considered ‘connected’ to another person if:
- They are spouses or civil partners.
- They are parent and child or siblings.
- They are connected through company ownership. For example, if one person controls multiple companies, then those companies are connected.
Calculating SDLT for Linked Transactions
When transactions are linked, you need to aggregate the total consideration for all transactions involved, except for rent payments. Once you have this total, you apply the appropriate tax rate to calculate the SDLT due.
Calculation Example 1: Joint Purchase by Spouses
Let’s consider an example involving a husband and wife.
– Jack buys a house for £240,000.
– Jill, his wife, buys the adjacent garden for £20,000.
– Both purchases are from the same seller and are part of a single arrangement.
Here’s how both Jack and Jill would complete their SDLT1 forms:
Jack’s SDLT1 Return:
– Question 10: Jack will report £240,000 (the price he paid for the house).
– Question 13: He will tick ‘yes’ since there are linked transactions.
– Question 13, Part 2: He will write £260,000 (£240,000 + £20,000 from Jill’s garden purchase).
– Question 14: The SDLT amount due is calculated at 3% of £260,000, resulting in £7,200.
– Question 15: Jack will add a late filing penalty of £100, making the total SDLT payable £7,300 (£7,200 + £100).
Jill’s SDLT1 Return:
– Question 10: Jill will report £20,000 (the price she paid for the garden).
– Question 13: She will also tick ‘yes’.
– Question 13, Part 2: Jill will state £260,000 as well.
– Question 14: Her SDLT amount is £600, calculated at 3% of £20,000.
– Question 15: Including the £100 fixed late filing penalty, Jill’s total will be £700 (£600 + £100).
Key Points to Remember
– Always check connections between parties in a transaction to determine if they are linked.
– Include all relevant transactions in your SDLT calculation.
– Apply the correct rates when calculating SDLT based on the combined consideration.
– Complete each SDLT1 form accurately to avoid additional penalties.
Common Queries Regarding Linked Transactions
Here are a few common questions people might have when filling out the SDLT1 form regarding linked transactions.
What happens if one of the transactions is exempt from SDLT?
Even if one transaction would typically be exempt from SDLT, if it is linked with another taxable transaction, you still need to consider the total consideration and apply the relevant tax rate.
Is there a specific exemption for small transactions?
There isn’t a blanket exemption for small transactions. You must report all transactions and provide the total consideration to HMRC.
What if we are unsure about being ‘connected’?
If you have doubts about whether parties involved in a transaction are connected, you should seek advice. Clarifying these details is essential, as they directly impact your SDLT returns.
Additional Notes on Penalties
Filing your SDLT1 form late incurs fixed penalties. The penalty for late filing is £100. This penalty applies to each transaction that is linked, so if both Jack and Jill file their entries late, they each face this additional cost.
Final Thoughts on Recording Linked Transactions
Taking the time to understand linked transactions ensures that you fill out the SDLT1 forms correctly. Always keep a record of both transactions and any correspondence related to them. This way, you can easily refer back to your calculated totals and justifications if needed.
In particular, always include a note on how you calculated your total consideration when expanding on Question 13. It’s helpful for HMRC to have a clear understanding of the transactions involved.
When you finish, make sure to double-check that all figures are correct and that both names are listed properly on each form. Doing so can help avoid complications later on.
If you need further clarification or assistance, please refer to our dedicated advice page at SDLTM62085 – Processing. This resource provides additional insights and support on completing your SDLT1 forms, especially regarding linked transactions and what to watch out for.
Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: Guidance on Completing SDLT1 Forms for Linked Property Transactions
