HMRC SDLT: Guide to Disregarded Consideration in Stamp Duty Land Tax Transactions

Disregarded Consideration in Notional Transactions

When determining the chargeable consideration for a notional transaction under UK tax law, certain transactions are excluded from consideration. These exclusions apply to transactions covered by specific sections and schedules, ensuring that the amounts paid in these cases are not factored into the chargeable consideration. However, it’s important to note that these transactions may still be part of a broader scheme transaction.

  • Section 60: Transactions for compulsory purchase facilitating development are disregarded.
  • Section 61: Compliance with planning obligations is not considered.
  • Section 63: Demutualisation of insurance companies is excluded.
  • Section 64: Demutualisation of building societies is disregarded.
  • Section 65: Incorporation of limited liability partnerships is not included.
  • Schedule 8: Charities relief transactions are excluded from consideration.

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Guidance on Chargeable Consideration for Certain Transactions

This page was introduced on 15 January 2020

Understanding Chargeable Consideration

When determining how much chargeable consideration there is for a notional transaction, it’s important to know that certain payments need to be ignored. If you are involved in a transaction that falls under specific sections or schedules of the law, you do not include those amounts when calculating the chargeable consideration.

Sections and Schedules to Disregard

The following sections and schedules outline situations where amounts paid do not count as chargeable consideration:

  • Section 60 – Compulsory purchase facilitating development
  • Section 61 – Compliance with planning obligations
  • Section 63 – Demutualisation of insurance company
  • Section 64 – Demutualisation of building society
  • Section 65 – Incorporation of limited liability partnership
  • Section 66 – Transfers involving public bodies
  • Section 67 – Transfer in consequence of reorganisation of parliamentary constituencies
  • Section 69 – Acquisition by bodies established for national purposes
  • Section 71 – Certain acquisitions by registered social landlords
  • Section 74 – Exercise of collective rights by tenants of flats
  • Section 75 – Crofting community right to buy
  • Schedule 6A – Relief for certain acquisitions of residential property
  • Schedule 8 – Charities relief

What This Means for Transactions

Even though the payments made for a transaction as stated in the sections and schedules above are excluded from the chargeable consideration, the transaction itself might still be part of a wider scheme. This means it may need further consideration under different rules or guidelines. It’s essential for both buyers and sellers to understand how these exclusions work in the context of their specific transactions.

Examples of When Consideration is Disregarded

Here are a few examples illustrating how chargeable consideration may be calculated in practical scenarios:

  • Example 1: Compulsory Purchase
    • If a local authority acquires land from a property owner as part of a compulsory purchase order to build a new roadway, any payment made as part of this transaction is not included in the chargeable consideration. Reference: SDLTM22000.
  • Example 2: Planning Obligations
    • When a developer pays for improvements that ensure compliance with local planning obligations, those payments are excluded from the overall chargeable consideration for the property. Reference: SDLTM22500.
  • Example 3: Demutualisation Example
    • If an insurance company goes through a demutualisation process, the payments made by policyholders to acquire shares in the newly formed company do not count as chargeable consideration. Reference: SDLTM23500.

Importance of Identification of Relevant Sections

It is vital for individuals involved in property transactions to identify whether their dealings fall within any of the sections or schedules mentioned. This ensures accurate calculation of the chargeable consideration and compliance with the law. Misunderstandings or inaccuracies could lead to penalties or unpaid duties.

Other Considerations in Property Transactions

There are various factors that may need attention within property transactions, including:

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Written by Land Tax Expert Nick Garner.
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