HMRC SDLT: SDLTM04010 – Scope: How much is chargeable: fixtures and fittings

Principles and Concepts of Chargeable Fixtures and Fittings

This section of the HMRC internal manual provides guidance on the scope of chargeable amounts for fixtures and fittings. It outlines the principles and concepts that determine how much is chargeable, ensuring compliance with tax regulations.

  • Defines what constitutes fixtures and fittings.
  • Explains the criteria for chargeability.
  • Provides examples of common fixtures and fittings.
  • Details the calculation methods for determining chargeable amounts.
  • Ensures adherence to HMRC guidelines.

SDLTM04010 – Scope: How Much is Chargeable: Fixtures and Fittings

Understanding Fixtures and Fittings

When you buy a property, you may be paying for more than just the land itself. This includes various items attached to or included with the property. The distinction between what is considered a fixture (chargeable to Stamp Duty Land Tax or SDLT) and what is a chattel (not chargeable) is important for determining the correct SDLT liability.

Definition of Fixtures and Chattels

– Fixtures: These are items that are permanently attached to the property, meaning they cannot easily be removed without causing damage. Fixtures are included in SDLT calculations.
– Chattels: These are movable items not permanently attached to the property. Chattels are not included in SDLT calculations.

For example, a fitted kitchen would typically be seen as a fixture as it is integrated into the property. In contrast, free-standing furniture would be considered a chattel.

Determining the Chargeable Amount

According to the Finance Act 2003 (FA03/SCH4/PARA4), when you buy a property, a fair split must be made between the price paid for the land and the price for any non-land items, such as chattels. Key points include:

– The price attributed to the property generally will not require further division unless the purchaser has convincingly shown that a portion is specifically for chattels.
– A simple acknowledgment of chattels being present is not enough. The sale contract must clearly indicate whether items included in the sale are chattels.

For example, if you buy a house for £300,000, which includes furniture valued at £20,000, you need to establish that £20,000 is a fair value for those items. If this is proven, it will not be subject to SDLT.

Agreement on Price Apportionment

Even if both the buyer and seller agree on a specific division of the purchase price in the sale contract, HMRC (Her Majesty’s Revenue and Customs) will only accept it if the division of value is fair and reasonable.

– The expected value for chattels should be the open market value on the date of transaction, taking into account the item’s condition and quality.
– It is common that the market value of items considered chattels is much lower than what someone paid for them initially.

For instance, if a dining table was bought for £1,000 but is now worth £200 due to wear and tear, the value for SDLT assessment should be £200, not £1,000.

HMRC Enquiries

If there is a challenge regarding the value ascribed to chattels during an assessment, HMRC may investigate the matter further. They might do this by:

– Working with the Valuation Office Agency (VOA) to evaluate the items.
– Requesting an itemised list of chattels, including their current condition and market value, as of the effective date of the transaction (EDT).

This means if there’s doubt, it is essential to have proper documentation detailing what was included in the sale and how its value was determined.

Items Typically Considered Chattels

While HMRC cannot provide a full list of what qualifies as chattels, here are some examples that are generally accepted as chattels:

– Carpets (both fitted and loose)
– Curtains and blinds
– Free-standing furniture (like sofas and tables)
– Kitchen appliances (unless built-in)
– Electric and gas fires, provided they can be disconnected without damage
– Light fittings (like lamps and shades)

Conversely, the following items are typically not regarded as chattels:

– Fitted kitchen units and cupboards
– Wall-mounted ovens and Agas
– Fitted bathroom fixtures
– Heating systems
– Alarm systems

These distinctions help clarify what is included within a property’s SDLT calculation and which items are separate.

Naturally Attached Items

When considering items outside the building, there are also considerations about what is part of the land versus what might be seen as chattels:

– Part of the Land: Any plants, trees, or shrubs that are rooted in the ground, including fast-growing trees like Christmas trees, are considered part of the land and charged accordingly.
– Not Part of the Land: Normal annual crops from arable land, felled timber, and plants that are in pots are not treated as part of the land.

This classification is important because it affects whether SDLT applies.

Application to Non-Residential Property

While the guidance primarily focuses on residential property sales, similar principles will also apply to the purchase of industrial or commercial properties, especially where items like machinery or equipment are involved.

It is essential to establish whether the items in question are classified as fixtures or chattels, as this determination will affect SDLT calculations.

Tenant’s Fixtures

The classification of fixtures and chattels also extends to tenant’s fixtures, particularly in England and Northern Ireland:

– In general, tenant’s fixtures are considered part of the land, even if the tenant has the right to remove them.
– Each case will depend on specific facts; for example, machinery or equipment that can be easily removed—like taking off bolts—may be seen as a chattel rather than a fixture.
– Conversely, heavy machinery or systems integral to the structure of the property are likely to be treated as fixtures. For instance, an escalator, boiler, or large commercial kitchen equipment would typically be deemed fixtures.

Additionally, the tenant’s right to remove such fixtures is also seen as a chargeable interest under FA03/S48(1).

Final Considerations

This article provides clarity on SDLT as it pertains to fixtures and chattels. Understanding the specific classifications will ensure proper compliance with HMRC regulations when purchasing a property, whether residential or commercial. Always refer back to HMRC and legal resources for the most accurate and current information regarding property transactions.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM04010 – Scope: How much is chargeable: fixtures and fittings

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Written by Land Tax Expert Nick Garner.
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