HMRC SDLT: SDLTM09150 – Identifying P: Section 75A (1)(a)

Principles and Concepts of Section 75A (1)(a)

This section of the HMRC internal manual provides guidance on identifying ‘P’ under Section 75A (1)(a). It outlines the principles and concepts related to tax avoidance schemes, ensuring compliance with UK tax laws. Key points include:

• Explanation of the criteria for identifying ‘P’ in tax arrangements.
• Clarification of the legal framework surrounding Section 75A.
• Guidance on the application of anti-avoidance measures.
• Examples of scenarios where Section 75A may be applicable.

Identifying P in Land Transactions

This page was amended on 15 January 2020.

Understanding P and V in Land Transactions

In land transactions, it is important to identify the parties involved. In this context, P refers to the person who is acquiring a chargeable interest, while V refers to the person who is disposing of that interest.

What is a Chargeable Interest?

A chargeable interest is a legal right to a property that can incur Stamp Duty Land Tax (SDLT) when it is transferred from one party to another. An example of a chargeable interest is when a property owner sells their house to a buyer.

Identifying P in a Transaction

To understand who P is in a transaction, we must determine who is acquiring the chargeable interest from V. Here are some key points to consider:

• P must be a person or entity receiving the rights to the property.
• The chargeable interest must be acquired as part of a land transaction.
• P can be an individual, company or other legal entity.

Process of Identifying P

When looking to identify P, follow these steps:

1. Review the transaction details.
2. Check the parties involved in the transaction.
3. Determine who is receiving the rights to the property.

Examples of Identifying P

Let’s look at a couple of examples to clarify the identification of P:

Example 1: Residential Property Sale

Imagine a homeowner, V, who sells their house to a buyer, P. In this case:

• V is the person disposing of the house.
• P is the buyer who acquires the chargeable interest in the property.

Example 2: Company Acquiring Commercial Property

Consider a situation where a company, V, is selling its office building to another company, P. In this scenario:

• The company selling the property is V.
• The company buying the building is P, acquiring the associated chargeable interest.

Importance of Identifying P Correctly

Correctly identifying P in a transaction is essential for several reasons:

• Stamp Duty Land Tax (SDLT) Liability: The liability for SDLT depends on the person acquiring the property. If P is misidentified, it could lead to issues with SDLT calculations.
• Legal Document Preparation: The correct identification of P ensures that property transfer documents are prepared accurately, which can help avoid disputes later.
• Regulatory Compliance: Proper identification helps ensure that the transaction complies with legal and tax requirements.

Special Cases in Identifying P

Sometimes, identifying P might not be straightforward. Here are some special cases to consider:

Multiple Buyers

If a property is sold to multiple buyers, each one of them can be considered a P. For example:

• V sells a property to three individuals, A, B, and C.
• In this case, A, B, and C are all considered P, as they are all acquiring rights to the property.

Indirect Acquisitions

Sometimes, P might acquire a chargeable interest indirectly. For example:

• A property is sold to a company, which is wholly owned by P.
• Even though the transaction is between V and the company, P is still the ultimate beneficiary.

In such scenarios, it is important to recognize that P still exists even if the acquisition is not direct.

Considerations for Different Types of Transactions

Identifying P can vary based on the type of transaction taking place. Here are some insights:

Transfers vs. Sales

When property is transferred rather than sold, the principles of identifying P remain similar:

• For a transfer between family members, for instance, if V transfers a property to their child, P is the child receiving the property.
• Understanding the relationship and context of the transfer is crucial.

Leases

In cases of leasing property:

• P is typically the tenant receiving the right to occupy and use the property.
• V remains the landlord maintaining ownership.

Possible Challenges in Identifying P

There can be challenges when trying to identify who P is. These include:

• Complex Transactions: In transactions with intricate structures or multiple parties, pinpointing P can become complicated.
• Changes in Parties: If parties change during the transaction process, it’s important to identify who ultimately acquires the interest.
• Documentation Issues: If the paperwork is not clear, it may lead to confusion regarding who the acquiring party is.

Legal and Tax Implications of Misidentifying P

Misidentifying P can lead to various negative consequences:

• Incorrect SDLT Payment: If SDLT is calculated for the wrong individual, it may lead to an underpayment or overpayment of tax.
• Legal Disputes: Misidentification can result in disputes over property rights, ownership, and subsequent legal action.
• Fines and Penalties: If the HMRC finds discrepancies in SDLT filings due to misidentified parties, it can impose fines.

Best Practices for Identifying P

Here are some best practices to help with the accurate identification of P in land transactions:

• Maintain Clear Documentation: Ensure all agreements and contracts clearly outline the parties involved in the transaction.
• Open Communication: Keep communication lines open among all parties to clarify who is acquiring the chargeable interest.
• Consult Professionals: Engage solicitors or tax advisors with experience in property and SDLT matters for guidance.

When You Need Further Help

If you find it difficult to identify P or have questions about what to do, consider contacting the HMRC or a tax professional. They can provide you with valuable assistance and information tailored to your specific transaction.

For more detailed guidance on SDLT matters, please reference the HMRC SDLT guidance here: SDLTM09150 – Identifying P: Section 75A (1)(a).

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09150 – Identifying P: Section 75A (1)(a)

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