HMRC SDLT: Higher Rate Stamp Duty Land Tax for Non-Natural Persons Acquiring Residential Property
Higher Rate Charge for SDLT on Residential Property Acquisitions
The higher rate Stamp Duty Land Tax (SDLT) charge applies to acquisitions of residential property by certain non-natural persons, such as corporate bodies and partnerships with corporate members. This charge is relevant when acquiring a ‘higher threshold interest’ and includes transactions for collective investment schemes. There are specific exclusions and conditions, particularly for companies acting as trustees or engaging in certain business activities.
- Higher rate charge applies to corporate bodies and partnerships with corporate members.
- Includes acquisitions for collective investment schemes.
- Exclusions exist for trustees and certain business activities.
- 17% higher rate charge applies to lease grants exceeding the threshold.
- Only the premium is considered for the higher rate charge.
“`
Read the original guidance here:
HMRC SDLT: Higher Rate Stamp Duty Land Tax for Non-Natural Persons Acquiring Residential Property
Understanding the Higher Rate Charge for Stamp Duty Land Tax (SDLT)
What is Stamp Duty Land Tax (SDLT)?
Stamp Duty Land Tax is a tax that you pay when you buy a property or land in England and Northern Ireland. The amount of tax you owe depends on the price you pay for the property. There are different rates and rules, which can vary depending on who is purchasing the property.
Higher Rate Charge Overview
In certain situations, you must pay a higher rate of SDLT, which is often referred to as the ‘higher rate charge.’ This applies when a property is acquired by specific types of purchasers. Here’s a breakdown of when the higher rate charge comes into play:
– Higher Threshold Interest: The higher rate becomes applicable when a higher threshold interest is acquired. For details on what this means, refer to [SDLTM09515](https://stampdutyadvicebureau.co.uk/hmrc/SDLTM09515).
– Who is Subject to the Higher Rate? The higher rate applies to acquisitions made by:
– A body corporate, which usually means a company limited by shares.
– A partnership that includes a body corporate among its members.
– Purchases made for a collective investment scheme.
What is a Collective Investment Scheme?
A collective investment scheme is defined in Part 17 of the Financial Services and Markets Act 2000, specifically in section 235. It typically involves pooling funds from multiple investors to invest in various assets collectively.
– If a partnership includes a collective investment scheme among its members, any property acquired through that partnership will also incur the higher rate charge since the purchase is considered for the purposes of the collective investment scheme.
Joint Purchases
The higher rate charge also applies in cases where two or more purchasers are acting together to buy a property. If at least one of those purchasers falls into one of the categories mentioned earlier (like a body corporate or a collective investment scheme), then the higher rate applies. For more information, see [FA03/SCH4A/PARA3(5)](https://stampdutyadvicebureau.co.uk/hmrc/FA03/SCH4A/PARA3(5)).
Exemptions from the Higher Rate Charge
Not all transactions attract the higher rate charge. Some exemptions exist, including:
– Trustee of a Settlement: If a company is acting as a trustee of a settlement, it may not be subject to the higher rate charge, provided it meets specific conditions.
– Certain Business Activities: Some business and trading activities might be exempt from the higher rate if certain criteria are fulfilled.
Impact of Leases on the Higher Rate Charge
When the transaction involves granting a lease, special rules apply.
– If the premium (the upfront payment made for the lease) exceeds the higher rate threshold, the 15% higher rate charge is triggered.
– It is important to note that only the premium is considered for the higher rate charge, while the normal rules in [FA03/S56/SCH5](https://stampdutyadvicebureau.co.uk/hmrc/FA03/S56/SCH5) apply to the rent.
Key Steps for Identifying If the Higher Rate Charge Applies
To determine if the higher rate charge applies to a property acquisition, consider the following steps:
1. Identify the Type of Purchaser: Determine whether the purchaser is a body corporate, a partnership including a body corporate, or acting for a collective investment scheme.
2. Assess Joint Purchases: Check if multiple purchasers are involved and if any of them fall into the above categories.
3. Examine the Nature of the Purchase: Look at the intentions behind the purchase—if it aligns with collective investment schemes, the higher rate may be applicable.
4. Look at Lease Transactions: If purchasing a lease, ensure to review the premium against the higher rate threshold.
Examples to Illustrate the Higher Rate Charge
To clarify how these rules work, let’s look at a few examples:
– Example 1: A company (body corporate) buys a residential property valued at £500,000. Since it’s a body corporate, the higher rate charge will apply because it is acquiring the property for its investment purposes.
– Example 2: Two individuals are purchasing a residential property together, but one of them is a company. The higher rate charge applies here too, because one of the joint purchasers is a body corporate.
– Example 3: If a partnership including a body corporate buys a residential property for a investment scheme, the higher rate applies due to its collective investment nature.
– Example 4: A company acting as a trustee of a settlement buys a residential property. If the conditions for exemption are satisfied, the higher rate will not be charged.
– Example 5: If a company grants a lease with a premium of £1,000,001 (above the higher rate threshold), the higher rate charge of 15% is applicable on the premium. However, the rent must be assessed according to normal rules.
Final Points to Consider
When engaging in property transactions, it’s vital to understand the implications of the higher rate SDLT charge. Always check:
– If the type of purchaser triggers the higher rate.
– The nature of joint purchases.
– Whether any exemptions apply to your situation.
– The specifics of lease agreements, especially concerning premiums.
Failure to account for these factors can lead to unexpected tax liabilities. It’s advisable to seek professional guidance if you’re unsure about how these rules apply to your individual circumstances.
Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: Higher Rate Stamp Duty Land Tax for Non-Natural Persons Acquiring Residential Property
