HMRC SDLT: SDLTM09130 – Identifying “V” and “P”: Section 75A (1)(a)
Principles and Concepts of SDLTM09130
This section of the HMRC internal manual explains the identification of “V” and “P” under Section 75A (1)(a). It provides guidance on the application of tax regulations and compliance requirements.
- Defines the terms “V” and “P” in the context of tax legislation.
- Explains the criteria for identifying relevant transactions.
- Outlines the implications of Section 75A for taxpayers.
- Provides examples to illustrate the application of these rules.
Read the original guidance here:
HMRC SDLT: SDLTM09130 – Identifying “V” and “P”: Section 75A (1)(a)
Understanding Section 75A: Identifying V and P
This guidance was introduced on 15 January 2020. It explains the first condition of Section 75A related to identifying the parties involved in a transaction.
Key Terms: V and P
The section focuses on two key roles:
- V: This stands for the person who disposes of a chargeable interest.
- P: This stands for the person who acquires either that chargeable interest or a chargeable interest that comes from it.
When Does Section 75A Apply?
To determine if Section 75A applies, we look at the conditions set out in the legislation. Here are the main points to consider:
- One person (V) must be transferring a chargeable interest.
- Another person (P) must be acquiring that chargeable interest or a new chargeable interest that has been derived from it.
Objective Test for Identifying V and P
Identifying V and P is not based on how the parties view their roles in the transaction but is an objective test. This means:
- The identification should rely on the actual nature of the transactions taking place.
- HMRC is required to follow the criteria set out in Section 75A without the ability to use discretion.
Dealing with Multiple Parties
In situations where there are several parties involved, identifying who P is can become complex. Additional guidance is provided for these instances. If you find yourself in this situation, you can refer to SDLTM09160 for more detailed information.
Examples of V and P in Transactions
To illustrate how to identify V and P, let’s look at some examples:
- Example 1: Simple Sale
Person A owns a piece of land and sells it to Person B. In this case:- Person A is V because they are disposing of their interest in the property.
- Person B is P because they are acquiring that chargeable interest.
- Example 2: Lease Assignment
Person C leases a commercial property and then assigns that lease to Person D. Here:- Person C is V because they are giving up their interest in the lease.
- Person D is P because they are taking on that chargeable interest from Person C.
- Example 3: Ownership Transfer in a Company
Company E owns a property that it sells to Company F. In this case:- Company E is V as it is disposing of its chargeable interest in the property.
- Company F is P because it is acquiring that chargeable interest directly from Company E.
Implications of Incorrect Identification
If V and P are misidentified, it can lead to incorrect tax assessments and failures to comply with Stamp Duty Land Tax (SDLT) requirements. Some issues that may arise include:
- P may incorrectly claim reliefs or exemptions meant for a specific type of acquisition.
- V could end up facing penalties if the disposal is not accurately reported.
- HMRC may not accept claims regarding SDLT that are based on inaccurate identification of V and P.
Further Considerations
When dealing with transactions, consider the following:
- Examine all documents related to ownership and titles carefully to ensure clarity on who is V and who is P.
- Collaborate with legal and financial advisors to ensure all parties involved understand their roles in the transaction.
- Keep records of the transactions to support your identification of V and P in case of any inquiries from HMRC.
Where to Find Additional Information
If you need more detailed information about specific situations regarding V and P, consider consulting additional resources or legislation documentation. The SDLTM09160 page provides guidance on cases involving multiple parties.
Common Misunderstandings
People sometimes have misunderstandings about who qualifies as V and P, particularly in complicated arrangements. Here are a few clarifications:
- Misunderstanding 1: Controlling Interests
Some may believe that if a person holds a controlling interest in a company rather than direct ownership, they cannot be considered V or P. This is incorrect, as control does not negate the transfer of chargeable interests. - Misunderstanding 2: Gift Transactions
In cases where a chargeable interest is gifted rather than sold, V and P can still be clearly identified. For instance, if Person G gifts property to Person H, Person G is still V and Person H is P, even without a sale.
Final Points to Keep in Mind
As you navigate transactions involving chargeable interests, remember these key points:
- Always assess the nature of the transaction to determine accurate identification of V and P.
- Consult the relevant sections of HMRC guidance if in doubt.
- Documentation and clarity on roles can prevent complications during audits or assessments.
Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09130 – Identifying “V” and “P”: Section 75A (1)(a)
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