HMRC SDLT: SDLTM00530 – Scope: What is chargeable: Exempt transactions: Gifts of property FA03/SCH3/PARA1

Principles and Concepts of Exempt Transactions

This section of the HMRC internal manual explains the scope of chargeable transactions, specifically focusing on exempt transactions involving gifts of property. It outlines the relevant legislation under FA03/SCH3/PARA1.

• Defines what constitutes a chargeable transaction.
• Explains exemptions applicable to gifts of property.
• Details the legislative framework governing these exemptions.
• Provides guidance on interpreting the relevant legal provisions.

Understanding Stamp Duty Land Tax (SDLT) on Gifts of Property

What is Chargeable?

Stamp Duty Land Tax (SDLT) applies when you buy property or land in the UK over a certain price. However, there are certain situations where SDLT does not apply, meaning you do not have to pay this tax. It is important to understand what these situations are.

You do not need to pay SDLT on gifts of property. This means if you give someone a property or land without any payment, this transaction is exempt from SDLT. Here are some examples of scenarios where SDLT does not apply:

• Gifts of Property: If you transfer your property to someone else as a gift, such as a family member or friend, you do not need to pay SDLT.
• Testamentary Dispositions: This refers to property that you leave to someone in your will. The recipient does not pay SDLT on the property they receive through your will.
• Intestacy Law Dispositions: If someone dies without a will (intestate), the property automatically passes to heirs according to the law. These transfers are also exempt from SDLT.
• Trust Property Transfers: If property is transferred to beneficiaries under a trust, and it follows the rules of that trust, SDLT does not apply to these transfers.

Acquisitions by Operation of Law

Certain acquisitions of property occur automatically due to legal circumstances. These transactions include instances like inheriting property or receiving property through court orders. When these transfers happen, they are not subject to SDLT.

For example, if a couple jointly owns a property and one partner passes away, the surviving partner may automatically acquire full ownership. In this case, SDLT is not applicable to the transfer of property ownership between them.

Exempt Transactions and Their Definitions

It is important to understand the definitions of various exempt transactions. Here are a few key terms related to SDLT exemptions:

• Gift: A voluntary transfer of property from one person to another without receiving anything in return. In the context of SDLT, when you gift property, it is typically not considered a transaction for which SDLT needs to be paid.
• Will: A legal document that outlines how a person’s property and assets should be distributed after their death. When property is passed according to a will, it is known as a testamentary disposition.
• Intestacy: The state of dying without leaving a valid will, resulting in the distribution of a deceased person’s property according to statutory rules. This is governed by intestacy laws.
• Trust: A legal arrangement where one party (the trustee) holds property for the benefit of others (the beneficiaries). Transfers of property under the terms of a trust can often be exempt from SDLT.

Additional Information on Exemptions

While gifts and certain transfers are exempt from SDLT, it is essential to be aware of specific conditions under which these exemptions apply. Here are a few points to consider:

– If there is a mortgage associated with the property being transferred, the exemption status might change. If the gift is subject to a mortgage, it is advisable to seek professional guidance to understand potential SDLT implications.

– When properties are held in a trust, and the beneficiaries receive property outright from the trust, this is usually exempt from SDLT only if certain conditions are met. You should make sure to check the specific terms of the trust.

Further Considerations

When you consider transferring property, whether as a gift or otherwise, it is always a good idea to:

– Consult with professionals, such as solicitors or tax advisors, who can provide you with clear advice tailored to your specific situation and help you navigate SDLT rules.

– Keep thorough records of your property transactions. This will help clarify your intentions and decisions regarding property transfers.

– Understand that property transfers to certain groups, such as charities, also generally have SDLT exemptions. In such cases, it is again essential to check the rules that might apply.

Resources for More Information

If you need to find more detailed guidance or specific scenarios involving the SDLT exemptions, you can access official resources. For example, further explanations can be found by checking the SDLTM00530 – Scope: What is chargeable: Exempt transactions: Gifts of property FA03/SCH3/PARA1.

By familiarising yourself with these principles and guidelines, you can better understand your responsibilities and the benefits of SDLT exemptions on property transfers.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM00530 – Scope: What is chargeable: Exempt transactions: Gifts of property FA03/SCH3/PARA1

View all HMRC SDLT Guidance Pages Here