HMRC SDLT: SDLTM00550 – Scope: What is chargeable: Exempt transactions: On the ending of a marriage or civil partnership FA03/SCH3/PARA3 and FA03/SCH3/PARA3A

Exempt Transactions on Ending a Marriage or Civil Partnership

This section of the HMRC internal manual outlines the principles and concepts related to exempt transactions under FA03/SCH3/PARA3 and FA03/SCH3/PARA3A, specifically concerning the ending of a marriage or civil partnership.

• Explains the scope of chargeable transactions.
• Details exemptions applicable during the dissolution of marriages or civil partnerships.
• Provides guidance on legal frameworks and tax implications.
• Clarifies conditions under which exemptions apply.

Exemptions for Stamp Duty Land Tax when a Marriage or Civil Partnership Ends

When a marriage or civil partnership comes to an end, certain property transactions can be exempt from Stamp Duty Land Tax (SDLT). This guidance is aimed at helping you understand which transactions qualify for this exemption.

Key Conditions for Exemption

To qualify for the SDLT exemption in these situations, the following conditions must be met:

– Type of Relationship: The transactions must be between the parties who were married or in a civil partnership. This means that if the transfer involves anyone else, the exemption will not apply.

– Reasons for the Transaction: The exemption applies to transactions resulting from one of the following situations:
– A court order
– An agreement made by the partners regarding the end of their relationship
– A judicial separation or a separation order

Examples of Exempt Transactions

Here are some examples to illustrate the types of transactions that can be exempt from SDLT when a marriage or civil partnership ends:

– Court Orders: If a court has issued an order that requires one partner to transfer their interest in a property to the other partner as part of the divorce settlement, that transaction might be exempt from SDLT.

– Agreements Between Partners: Suppose a couple agrees, as they are separating, that one partner will retain ownership of the family home while the other will receive a different asset. If they draft a formal agreement documenting this arrangement, the transfer will likely be exempt from SDLT.

– Judicial Separation: In cases where a couple has obtained a judicial separation, transferring ownership of shared property might also qualify for the SDLT exemption, as long as it is part of the separation process and only involves the couple.

What Does Not Qualify for the Exemption?

It is important to note that not every transaction related to the end of a marriage or civil partnership will be exempt from SDLT. Here are some circumstances where the exemption doesn’t apply:

– Involvement of Third Parties: If the transaction involves anyone who is not one of the spouses or civil partners, the exemption is lost. This means if a third party is involved in any way, maybe through buying or selling property that was part of the relationship, SDLT will need to be paid.

– Transfer as a Gift: If one partner gives a property to the other as a gift outside of a court order or separation agreement, this transaction may not be exempt. It could be subject to SDLT unless the gift is part of an agreed settlement during the dissolution of the marriage or civil partnership.

Relevant Legislation

The specific provisions that outline these exemptions can be found in the Finance Act 2003. The relevant sections include:

– FA03/SCH3/PARA3: This section deals with the definitions and the eligibility for exemptions from SDLT in relation to a separation or divorce.
– FA03/SCH3/PARA3A: This section expands on the existing rules by including the circumstances under which such transactions could be exempt.

You can find more detailed information on these sections by checking the specific SDLT guidance page [here](https://stampdutyadvicebureau.co.uk/hmrc/SDLTM0000).

How to Claim the Exemption

If you believe your transaction qualifies for the SDLT exemption, it’s important to follow the correct process when submitting your SDLT return. Here’s how to do this:

– Identify the Transaction Type: Make sure your transaction is between the spouses or partners, and related specifically to the end of the relationship.

– Document Everything: It is essential to have solid documentation to support your claim for exemption. This could include agreements, court orders, or evidence of the relationship-ending transaction.

– Complete the SDLT Return: When filling out the SDLT return, indicate that the transaction qualifies for exemption due to one of the reasons mentioned above. You’ll need to complete the relevant forms carefully.

– Submit on Time: Ensure that you submit your SDLT return within the specified time limits, even if you believe the transaction is exempt. This helps to avoid any penalties or late fees.

Potential Penalties for Incorrect Claims

If you incorrectly claim an SDLT exemption when you are not entitled to it, you may face penalties. Here are a few important points to consider:

– Misrepresentations: If you knowingly provide false information to claim an exemption, you could be liable for severe penalties, including fines and interest on any unpaid tax.

– Errors: Even unintentional mistakes can lead to additional charges, including late payment penalties if the correct SDLT is not paid on time.

– HMRC Investigation: If your claims are found to be incorrect, HMRC may investigate your tax affairs, which can result in further scrutiny and potential penalties.

When to Seek Advice

If you are unsure about whether to claim an exemption or how to proceed, it may be wise to seek professional advice. Here are some situations where advice could be beneficial:

– Complex Situations: If your relationship has certain complexities, such as significant assets, business interests, or children whose welfare may influence asset divisions.

– Unclear Documentation: If you do not have clear agreements or court orders regarding the property or assets being transferred.

– Involvement of Third Parties: If there are third-party interests in the property or assets, it’s advisable to clarify how that may affect your SDLT obligations.

By understanding these terms, conditions, and examples, you can determine your eligibility for the SDLT exemption in connection with the dissolution of a marriage or civil partnership. Make sure to keep records and seek professional help if necessary to ensure compliance with all regulations.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM00550 – Scope: What is chargeable: Exempt transactions: On the ending of a marriage or civil partnership FA03/SCH3/PARA3 and FA03/SCH3/PARA3A

View all HMRC SDLT Guidance Pages Here