HMRC SDLT: SDLTM09590 – 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: trades involved in making a dwelling available to the public FA03/SCH4A/PARA5B

Principles and Concepts of SDLT Higher Rate Charge

This section of the HMRC internal manual explains the conditions under which the higher rate of Stamp Duty Land Tax (SDLT) is applicable. It focuses on acquisitions of residential property by certain non-natural persons, as outlined in FA03/S55/SCH4A. Key points include:

• Definition of non-natural persons subject to the higher rate.
• Criteria for when a dwelling is considered available to the public.
• Specific legislative references guiding the higher rate charge.

Understanding Stamp Duty Land Tax (SDLT) Charges for Certain Property Transactions

Overview of SDLT and Its Higher Rates

Stamp Duty Land Tax, or SDLT, is a tax that is charged when you buy a property or land over a certain price in England and Northern Ireland. Typically, the rate you pay depends on the price of the property and can increase if you are buying an additional dwelling (such as a second home or buy-to-let property).

For certain non-natural persons, such as companies, trusts, or partnerships, there may be a higher rate of SDLT applied. This higher rate can reach up to 15%. However, there are specific cases where this charge does not apply.

Conditions for the Higher Rate Charge

For the 15% higher rate to not be applied, certain conditions must be met. Instead, the property transaction will attract the higher rates that apply to additional dwellings. The following points detail the requirements for this transition:

• Intent to Generate Income: The buyer must acquire the property with the intention of using it as a source of income in a qualifying trade. This means the property should generate revenue, such as through rental income.
• Prepared Commercial Plans: The buyer should have reasonable commercial plans in place to act on the intention to generate income without unnecessary delays. This includes any understandable delays caused by commercial factors that cannot be avoided.

Additional SDLT Payments and Withdrawal of Relief

If the criteria for not applying the 15% higher rate is met, the buyer will be subject to the higher rates which are charged for additional dwellings. However, if certain rules regarding the Withdrawal of Relief apply, an additional return and payment of SDLT may be necessary.

You can find more details about these rules at SDLTM09665 – [Withdrawal of relief](https://stampdutyadvicebureau.co.uk/hmrc/SDLTM09665).

Example of SDLT Application

To illustrate how these rules work, consider the following scenario:

– Acquisition Example: Suppose a property development company buys a commercial block of flats. They plan to convert these flats into rental units to generate income.

– Commercial Intent: The company’s intention is clear – to earn money from renting out these flats. Since they have a plan to do this soon (with some unavoidable delays for modifications), they meet the SDLT criteria.

– Tax Rate: In this case, the 15% higher rate will not apply. Instead, the company will be taxed based on the higher rates associated with additional dwellings since they meet the necessary conditions.

Key Terms Explained

Understanding SDLT involves familiarising yourself with some specific terms. Here are some key concepts:

• Non-Natural Persons: This term refers to entities that are not individuals, such as companies, partnerships, or trusts.
• Qualifying Trade: A qualifying trade refers to a business activity that is carried out with the intention of making a profit, often requiring appropriate planning and operations.
• Higher Threshold Interest: This is the portion of the property transaction subject to SDLT assessments, based on its intended use and the buyer’s plans.

Final Thoughts on SDLT Transactions

When navigating SDLT, especially for non-natural persons acquiring residential properties, it’s vital to understand when and how higher taxes apply. The aim is to ensure compliance and avoid unexpected charges. Thus, being aware of your intentions with any property acquisition and maintaining thorough plans is essential for a smoother transaction.

For further queries regarding SDLT and related terms, you may want to consult the detailed guidance provided by the HMRC or professional advice tailored to your specific circumstances.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09590 – 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: trades involved in making a dwelling available to the public FA03/SCH4A/PARA5B

View all HMRC SDLT Guidance Pages Here