HMRC SDLT: SDLTM09550 – Scope: when is Stamp Duty Land Tax (SDLT) chargeable: higher rate charge for acquisitions of residential property by certain non-natural persons FA03/S55/SCH4A: exclusions from the higher rate charge

Principles and Concepts of SDLT Higher Rate Charge

This section of the HMRC internal manual discusses the higher rate charge for Stamp Duty Land Tax (SDLT) on residential property acquisitions by certain non-natural persons. It outlines exclusions from this higher rate charge under the Finance Act 2003, Schedule 4A.

• SDLT is a tax on property transactions in the UK.
• Higher rate applies to non-natural persons acquiring residential properties.
• Exclusions exist under specific legislative conditions.
• Guidance provided for understanding applicable scenarios.

Understanding the Higher Rate Charge for Stamp Duty Land Tax (SDLT)

This article explains when the higher rate of Stamp Duty Land Tax (SDLT) is charged when certain non-natural persons acquire residential properties. It includes important points about trusts and provides examples to clarify how these rules apply.

Higher Rate Charge Overview

• The higher rate of SDLT is typically charged at 15% for acquisitions of residential properties.
• This higher rate applies to non-natural persons which include companies, partnerships, and corporate bodies purchasing residential property.
• However, certain exemptions exist, especially when the purchaser acts as a trustee or in a similar capacity.

Trusts and the Higher Rate Charge

When a company acts as a trustee for a settlement, it is exempt from the higher rate SDLT charge. This applies regardless of whether the company is a ‘corporate trustee’ managing various settlements or a trustee for just one settlement.

A ‘settlement’ is defined under the Finance Act 2003 (FA03/SCH16/PARA1) as any trust that is not a bare trust. Important distinctions are made when it comes to different types of trustees:

• If a company acquires property as a corporate trustee, the higher rate charge does not apply.
• If a nominee or bare trustee makes an acquisition, SDLT will be calculated as though the interest belongs to those they are serving, with certain exceptions.

Examples of SDLT Calculations

Here are a few examples to illustrate how the rules apply:

Example 1: Corporate Trustee

• A company operates as a corporate trustee and purchases a housing interest valued at £2.5 million.
• The higher rate SDLT charge of 15% does not apply in this situation.
• Instead, the company will pay SDLT based on standard rates applicable to the transaction.

Example 2: Bare Trustee for an Individual

• A company acts as a bare trustee for an individual and buys a residential property worth £1.5 million.
• In this case, the 15% higher rate SDLT charge is not applied since the bare trustee status allows the individual to be deemed the purchaser.
• Whether the SDLT is calculated based on standard rates or higher rates depends on if the individual has ownership of any other properties.

Example 3: Bare Trustee for a Company

• An individual operates as a bare trustee for a company purchasing a residential property that costs £2.5 million.
• The higher rate charge will apply because, in this situation, the bare trustee structure is disregarded, and the company is identified as the purchaser.
• The 15% higher rate SDLT charge is applicable here.

Understanding Key Concepts

Here are some key concepts to bear in mind when dealing with SDLT and higher rate charges:

• Non-natural persons: These are entities like companies and partnerships that do not operate like individual people. They are subject to different tax rules compared to private individuals.
• Trustee Types: The type of trustee (corporate vs. bare) significantly impacts the SDLT charge. Corporate trustees are exempt from the higher rates, while bare trustees may or may not be, depending on the circumstances.
• Chargeable Interest: This refers to the interest in a property that is subject to SDLT, including both freeholds and leaseholds.
• Standard Rates: SDLT is calculated based on the standard rates for individuals unless the higher rate applies due to the circumstances outlined in the act.

Recap of Relevant Legislation

The guidelines for this higher rate charge and exemptions can be found in various parts of legislation, including:

• FA03/S55/SCH4A, which details the scope of the SDLT charge.
• FA03/SCH4A/PARA3(4), outlining how trusts operate concerning higher rate charges.
• FA03/SCH16/PARA1, providing the definition of a settlement.
• FA03/SCH16/PARA3, which explains the application of SDLT when a nominee or bare trustee is involved.

Final Notes

It’s important for purchasers to be aware of these rules when acquiring residential properties, especially in trust-based arrangements. Understanding your status in relation to SDLT will facilitate better planning and compliance with tax obligations.

For further information and guidance, individuals and companies are encouraged to refer to official resources or consult with tax professionals who specialise in property transactions and SDLT regulations.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09550 – Scope: when is Stamp Duty Land Tax (SDLT) chargeable: higher rate charge for acquisitions of residential property by certain non-natural persons FA03/S55/SCH4A: exclusions from the higher rate charge

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