HMRC SDLT: SDLTM09645 – 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: qualifying farming trade
Principles and Concepts of SDLT Chargeability
This section of the HMRC internal manual explains the conditions under which Stamp Duty Land Tax (SDLT) is chargeable at a higher rate for residential property acquisitions by non-natural persons. The focus is on qualifying farming trades under FA03/S55/SCH4A.
- SDLT applies to property acquisitions by companies and certain trusts.
- Higher rates are applicable to non-natural persons.
- Qualifying farming trades may be exempt from higher rates.
- Detailed guidance is provided for understanding these exemptions.
Understanding Qualifying Farming Trade for Stamp Duty Land Tax (SDLT)
What is Stamp Duty Land Tax (SDLT)?
Stamp Duty Land Tax (SDLT) is a tax you may need to pay when you purchase property or land in the UK. The amount you pay depends on the price you pay for the property and whether certain conditions apply. In some cases, like when purchasing property for farming purposes, special rules may apply that can affect how much SDLT you owe.
What is a ‘Qualifying Farming Trade’?
A ‘qualifying farming trade’ is defined in the tax law, specifically under Section 1125 of the Corporation Tax Act 2010 (CTA 2010). Here’s a breakdown of this term:
– Purpose of the Occupation: It refers to the occupation of land primarily for farming or husbandry. Farming involves the growing of crops or raising livestock.
– Market Gardening: In certain cases, the occupation of land may also be for market gardening, which generally means the cultivation of fruits, vegetables, or flowers for sale.
– Non-qualifying Activities: It’s important to note that simply keeping horses for riding or other non-commercial purposes does not count as farming or market gardening. This means if horses are kept primarily for leisure, it won’t be considered a qualifying farming trade.
– Commercial Basis: The farming or gardening must be done on a commercial basis, meaning it should be aimed at making a profit. If you’re not conducting the activity with the intention of profit, it doesn’t qualify.
Understanding ‘Occupying the Whole Dwelling’
When we talk about the occupation of a property for tax relief, there are specific rules regarding how much of the property needs to be used for qualifying farming trade.
– Occupying Part of the Dwelling: If you occupy only part of a dwelling (home) for farm-related activities, the entire property can still be treated as qualifying for relief. For instance, if you live in a house but run a small farm business from a room or a small section of the land, the regulations allow the whole property to be considered.
Applying the Farming Trade Definition
Let’s consider a couple of examples to illustrate how these definitions work in practice.
– Example 1: Commercial Vegetable Grower: Suppose you have a piece of land and you primarily grow vegetables for sale in local markets. This activity would clearly fall under the definition of a ‘qualifying farming trade’ as you are using the land for commercial farming with the intention of making a profit.
– Example 2: Horse Riding School: In contrast, if you operate a horse riding school where people pay to ride horses, this would not qualify as a farming trade. The focus is on providing a service rather than farming or market gardening for profit.
Implications for Stamp Duty Land Tax (SDLT)
The distinction between qualifying and non-qualifying activities is essential for SDLT purposes.
– Higher SDLT Rates: Certain types of property purchases incur a higher rate of SDLT, especially when purchased by non-natural persons (like companies). However, if the property fits into the ‘qualifying farming trade’ criteria, you may benefit from lower rates or exemptions.
– Example of SDLT Rates: If a company purchases a property for a horse riding school, it may face higher SDLT rates. Conversely, if the same company buys a farm where it grows vegetables, it might qualify for lower SDLT rates, provided it meets all the criteria.
Further Information on SDLT and Farming Properties
It’s crucial to understand the specific regulations and how your particular circumstances might affect your SDLT liability. Here are key aspects to consider:
– Documentation: You may need to provide documentation of your farming activities to demonstrate that they qualify as a commercial trade. This could include profit and loss statements or receipts from sales at markets.
– Consulting Professionals: It can be a good idea to seek advice from a tax professional or a solicitor who specializes in SDLT if you’re unsure about whether your property fits the criteria for a ‘qualifying farming trade.’
– Additional Resources: For more detailed guidance on SDLT and farming trade qualifications, you can refer to the guidance articles provided by HMRC. For example: SDLTM0000 – when is Stamp Duty Land Tax (SDLT) chargeable.
Conclusion Without a Summary
To navigate the complexities of SDLT, especially regarding farming trades, understanding what constitutes a ‘qualifying farming trade’ is key. The definitions and examples provided here aim to clarify how these concepts apply in practice. For those engaged in genuine agricultural activities, knowing your rights and responsibilities with SDLT can lead to significant savings. Be sure to stay informed and reach out for professional advice when needed to ensure compliance and take advantage of potential tax benefits.
Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09645 – 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: qualifying farming trade
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