HMRC SDLT: SDLTM09651 – 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 Housing Co-operatives

Principles and Concepts of SDLT Chargeability

This section of the HMRC internal manual outlines the conditions under which Stamp Duty Land Tax (SDLT) is chargeable, particularly focusing on the higher rate charge for residential property acquisitions by certain non-natural persons. It also discusses the role of Qualifying Housing Co-operatives under FA03/S55/SCH4A.

• SDLT is applicable to residential property acquisitions.
• Higher rate charges apply to non-natural persons.
• Qualifying Housing Co-operatives have specific considerations.
• Guidance is provided under FA03/S55/SCH4A.

Understanding Stamp Duty Land Tax (SDLT) for Qualifying Housing Co-operatives

What is Stamp Duty Land Tax (SDLT)?

Stamp Duty Land Tax (SDLT) is a tax you pay when you buy a property or land over a certain price in England and Northern Ireland. The amount of tax you owe depends on the purchase price of the property and the type of buyer you are.

Higher Rates of SDLT

In certain cases, buyers may be subject to higher rates of SDLT. One of these cases applies to non-natural persons, such as companies.

However, from 3 March 2021, there are specific conditions where the higher 15 per cent SDLT rate will not apply, especially for transactions involving a qualifying housing co-operative.

What is a Qualifying Housing Co-operative?

A qualifying housing co-operative is a specific type of housing entity that can benefit from lower SDLT rates. According to the Finance Act 2013, a qualifying housing co-operative must meet the following criteria:

• It must be a housing association as defined in the Housing Associations Act 1985 or the Housing (Northern Ireland) Order 1992.
• It must be a registered society as outlined in the Co-operative and Community Benefit Societies Act 2014 or the Co-operative and Community Benefit Societies Act (Northern Ireland) 1969.
• Its rules must comply with section 150A(2) of the Finance Act 2013.

Rules for Membership and Governance

The rules of a qualifying housing co-operative are important for defining how it operates and who can be involved. These rules must:

• Restrict membership to individuals who are tenants or prospective tenants of the property owned by the co-operative.
• Prevent the granting or assignment of tenancies to anyone who is not a member of the co-operative.
• Limit members from transferring their shares to non-members.
• Stop members from profiting from any return of share capital.
• Ensure that all members have equal voting rights.

Registration and Oversight

The Financial Conduct Authority (FCA) is responsible for the registration of co-operative societies under the relevant Acts mentioned above. The FCA maintains a public register that includes details about each registered co-operative, including its rules and status. This register is available on the FCA’s website.

SDLT Implications for Qualifying Housing Co-operatives

For transactions taking place on or after 3 March 2021:

– If a qualifying housing co-operative meets the necessary criteria, it will not need to pay the 15 per cent higher rate charge.
– Instead, SDLT will be calculated at the higher rates that apply to dwellings purchased by companies. More details can be found at SDLTM09835.

Withdrawal of Relief – Additional SDLT Payment

It is essential to note that if certain rules outlined in the Withdrawal of Relief – Qualifying Housing Co-operatives section (found at SDLTM09681) apply, the co-operative may need to make an additional SDLT payment.

Comparison with Annual Tax on Enveloped Dwellings (ATED)

Qualifying housing co-operatives are also eligible for relief from the Annual Tax on Enveloped Dwellings (ATED). This is another tax that applies to properties held in certain companies. For information regarding ATED and qualifying housing co-operatives, you can refer to section 41 of the ATED Technical Guidance.

Final Notes on Qualifying Housing Co-operatives

Qualifying housing co-operatives play a significant role in the housing market, providing opportunities for people to purchase or rent homes affordably. Understanding the advantages related to SDLT and additional taxes such as ATED can help individuals and organisations make informed decisions when engaging with co-operatives.

As these guidelines and rules might change, it is a good practice for co-operatives to remain updated with the latest regulations from the FCA and HMRC.

This guidance aims to give a clearer understanding of SDLT in relation to qualifying housing co-operatives. If you have further questions or require more information, it’s advisable to consult with a professional or refer to the appropriate governmental resources.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09651 – 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 Housing Co-operatives

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