HMRC SDLT: SDLTM09370 – SDLT paid for disregarded land transactions: Section 75C (10)

SDLT Paid for Disregarded Land Transactions: Section 75C (10)

This section of the HMRC internal manual provides guidance on Stamp Duty Land Tax (SDLT) for disregarded land transactions under Section 75C (10). It outlines the principles and concepts related to these transactions.

• Explains the criteria for disregarded land transactions.
• Details the calculation of SDLT in these cases.
• Provides examples to illustrate the application of Section 75C (10).
• Clarifies the legal implications and compliance requirements.

SDLT Paid for Disregarded Land Transactions: Section 75C (10)

This page was introduced on 15 January 2020.

What is SDLT?

Stamp Duty Land Tax (SDLT) is a tax you pay when you buy property or land in England and Northern Ireland. The tax amount depends on the property’s price and can vary based on the type of property, whether it’s residential or non-residential, and your circumstances, such as if you’re a first-time buyer or buying an additional property.

Understanding Disregarded Transactions

In some cases, certain land transactions can be disregarded for tax purposes. This means these transactions do not count when assessing SDLT. The rules for disregarding these transactions fall under Section 75A of the Finance Act.

The main idea is that if you have paid SDLT for a transaction that is later disregarded under Section 75A, that payment is treated differently. Instead of classifying it as payment for a waste transaction, it is reallocated to a different transaction.

When is SDLT Considered Paid for a Disregarded Transaction?

According to Section 75C, if SDLT is paid for a land transaction that is disregarded, this amount is treated as having been paid in relation to a hypothetical (or notional) transaction that requires a tax return.

The Notional Transaction

• Hypothetical Situation: Imagine you sell a property, and SDLT is paid based on that sale. Later, it turns out the sale is ignored for tax purposes under Section 75A. In this case, instead of just losing your SDLT payment, it’s as if you made a different sale—this is the notional transaction.
• Payer and Vendor: In this notional transaction, the parties involved are referred to as ‘V’ for Vendor and ‘P’ for Purchaser.

Paying Additional SDLT

Once the notional transaction has been identified, any additional SDLT that arises from it must also be paid. This means that if the tax situation that results from this imagined transaction is different from what was initially paid, you could owe more tax.

• Example: If the original property had a sale price of £300,000 and the ignored transaction was deemed notional at a higher value of £400,000, you may need to pay the difference in SDLT based on this new value.
• Calculation of SDLT: The tax is based on the additional amount relating to this hypothetical sale. You apply the current SDLT rates to the new figure and pay the additional tax owed.
• Reallocation: This process effectively reallocates your tax payment from the disregarded transaction to the assumed notional transaction.

Key Concepts to Remember

• Section 75A: This section identifies transactions that can be discounted from the SDLT calculation.
• Section 75C: This section discusses what happens after you’ve paid SDLT for a disregarded transaction.
• Notional Transaction: A theoretical transaction that your initial payment is linked to, even though it may not have occurred.

Further Clarifications

If you are unsure whether a transaction qualifies for disregard under Section 75A or if you have questions about how to proceed with additional SDLT payments arising from notional transactions, it’s advisable to consult HMRC guidelines or seek professional tax advice. Understanding your obligations can help you avoid issues later on.

Examples of Real-life Scenarios

• Property Foundation Case: Suppose you purchase a piece of land intended for residential development but later find out that an existing law prohibits such development. Given the legal change, this transaction might be disregarded under Section 75A. The SDLT you previously paid would then be assigned to a notional situation based on how the land transaction might have occurred legally.
• Joint Ownership Case: If you entered into a partnership to buy land but later withdrew from the agreement, your original SDLT payment might not apply to the disregarded agreement. Again, this payment transfers to a notional arrangement that takes into account the potential resale of the land.

Important Questions and Answers

What should I do if my transaction is disregarded?

If you find out that your transaction has been disregarded, review the details to understand how your SDLT payment is now classified. Prepare to calculate any additional tax that may be due based on the notional transaction rules.

How do I calculate the additional SDLT owed?

The tax owed on the notional transaction is calculated using current SDLT rates on the presumed sale amount. This process may involve applying the standard tax bands and calculating the difference between your original payment and what is now owed.

Who can help with SDLT queries?

For any specific queries or uncertainties, the HMRC website contains guidance or you can contact them directly for assistance. You may also wish to consult with a tax professional or solicitor experienced in property transactions.

Need More Information?

For additional details about SDLT and its application in various situations, including disregarded transactions as defined under Section 75C, visit the HMRC website or consult the SDLTM0000 guidance for comprehensive support.

Whether you’re a first-time buyer or involved in complex property transactions, understanding the implications of SDLT will help you navigate the purchasing process and ensure compliance with relevant tax laws.

Previous and Next Steps

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09370 – SDLT paid for disregarded land transactions: Section 75C (10)

View all HMRC SDLT Guidance Pages Here