HMRC SDLT: SDLTM03720 – Guidance – Chargeable Consideration and Fees

Principles and Concepts of Chargeable Consideration and Fees

This section of the HMRC internal manual provides guidance on chargeable consideration and fees. It outlines key principles and concepts relevant to taxation and financial transactions.

• Defines chargeable consideration in the context of financial transactions.
• Explains the application of fees in various scenarios.
• Provides examples to illustrate the principles.
• Offers guidance on compliance with HMRC regulations.
• Includes updates and amendments to existing policies.

Stamp Duty Land Tax (SDLT) Guidance: Chargeable Consideration and Fees

Stamp Duty Land Tax (SDLT) is a tax that buyers must pay when buying land or property in England, Wales, and Northern Ireland. The amount of tax payable is based on the total sum involved in the purchase or transfer of the property. This total amount is known as chargeable consideration.

What is Chargeable Consideration?

The chargeable consideration includes all money or assets exchanged for the property. Both direct payments, such as the purchase price, and indirect payments, like fees or gifts, can be included if they are part of the transfer agreement.

When Fees Are Considered Chargeable Consideration

In many property transactions, buyers may have to pay additional fees beyond the purchase price. In HMRC’s view, these fees can also count towards the chargeable consideration if they meet certain criteria:

• If paying the fee is a condition of the contract, meaning the seller will not agree to the transaction without this payment.
• If completing the property deal relies on the fee being paid.
• If the fee is only due once the property transaction is confirmed.

If any of the above is true, the additional fee must be added to the total chargeable consideration.

Understanding Contracts

It’s important to remember that SDLT laws do not require contracts to be written down formally. A contract can simply be an agreement between parties, which can be verbal or implied through actions.

When Fees Do Not Count as Chargeable Consideration

Sometimes, fees may be paid for services that do not affect the property transfer. In these cases, they do not count as chargeable consideration. For example:

• If a buyer pays legal fees for their own lawyer’s services, these are not part of the chargeable consideration. This is because:
• These fees are paid for legal services provided to the buyer, not to secure the property.
• The buyer must pay these legal fees regardless of whether or not the property transaction goes ahead.

Examples of Fees and Chargeable Consideration

The following scenarios illustrate how certain fees can impact chargeable consideration. These examples are for guidance only. The specific circumstances of each case will determine how the SDLT laws apply.

Example 1: Additional Fees as Part of Chargeable Consideration

Suppose a buyer purchases a home for £250,000. As part of the agreement, the seller requires the buyer to pay a non-refundable fee of £5,000 to cover renovation costs tied to the sale. Here, the £5,000 is included in the chargeable consideration because:

• The fee is a condition set by the seller.
• The transaction would not proceed without the fee being paid.

Therefore, the total chargeable consideration for SDLT would be £255,000 (£250,000 purchase price + £5,000 fee).

Example 2: Legal Fees Not Included in Chargeable Consideration

Let’s say a buyer pays £1,200 to a solicitor for legal advice while purchasing a property. These legal fees are not part of the chargeable consideration because:

• The fees are for legal services and not a payment to the seller.
• Even if the property sale fails, the buyer still owes this fee.

In this instance, the chargeable consideration remains only the purchase price of the property.

Example 3: Conditional Fees

Consider a scenario where a buyer is set to buy a flat for £200,000. The estate agent informs them that they need to pay a £3,000 fee for a property management service, which is only due if they proceed with the purchase. In this case, the £3,000 fee is chargeable consideration because:

• The fee must be paid if the transaction is to happen.
• The service is linked to the management of the property being purchased.

In this case, the total amount subject to SDLT would be £203,000 (£200,000 purchase price + £3,000 fee).

Example 4: Separate Matters

If a buyer pays £2,000 for a home inspection, this fee would typically not count as chargeable consideration. Why? Because:

• The payment is for a separate service aimed at checking the property’s condition.
• The fee is not required for the seller to agree to the sale.

Thus, the chargeable consideration remains just the sum paid for the property itself.

Implications of Fees on SDLT

Understanding how different fees can affect chargeable consideration is important, as it directly influences the amount of SDLT payable. Buyers must carefully assess all payments associated with their property transaction. Including these fees when calculating SDLT can help avoid any unexpected costs after the transaction is complete.

Consulting Guidance

If you are unsure about whether a fee is considered chargeable consideration, it is wise to consult further guidance or seek advice from a tax professional. Various considerations specific to your situation may apply, and professional advice can ensure compliance with SDLT regulations.

For more detailed information about chargeable consideration, you may refer to the following resources:

• SDLTM0000 – General SDLT Guidance
• SDLTM03720 – Chargeable Consideration Fees

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