HMRC SDLT: SDLTM09675 – 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:

Principles of SDLT Chargeability for Non-Natural Persons

This section of the HMRC internal manual outlines the conditions under which Stamp Duty Land Tax (SDLT) is chargeable at a higher rate for residential property acquisitions by certain non-natural persons, as per FA03/S55/SCH4A. Key principles include:

• Definition of non-natural persons subject to higher SDLT rates.
• Criteria for residential property acquisitions triggering higher charges.
• Exemptions and reliefs applicable to certain transactions.
• Compliance and reporting requirements for affected entities.

Understanding the Withdrawal of Relief for Properties Occupied by Certain Employees and Partners

This article explains how and when the relief from Stamp Duty Land Tax (SDLT) can be withdrawn if specific conditions are not met following the purchase of a dwelling. This applies to properties that are intended for occupation by employees or partners of a business. We will cover key concepts, conditions for relief withdrawal, and examples to clarify these points.

What is Relief from SDLT?

When acquiring residential properties, there are certain reliefs available from SDLT. These reliefs are based on the property being used primarily for business purposes and being made available for employees or partners to live in. However, if the conditions for this relief are not satisfied, the relief may be withdrawn, leading to a potential SDLT charge.

Conditions for Withdrawing Relief

Relief from SDLT will be withdrawn if any of the following conditions are not met within a specified period known as the ‘three-year control period.’ This is the timeframe during which the purchaser must adhere to specific requirements concerning the use of the property:

• Active Trade Requirement: The purchaser or a related group member must be operating a trade on a commercial basis with the goal of making a profit. This means that there should be a genuine business activity taking place.
• Availability for Qualified Occupants: The dwelling must be made accessible to qualifying employees or partners who can use it as their living accommodation. Simply owning the property is not sufficient.
• Primary Purpose Alignment: The dwelling must be available solely or mainly for business purposes related to the trade carried out by the purchaser or a group member. This requirement emphasizes that the property’s primary use should be for the trade.

Impact of Non-compliance During the Control Period

During the three-year control period, the withdrawal of relief can also occur under the following circumstances:

• If the dwelling has not yet been made available to qualifying employees or partners for their use.
• If the dwelling was previously available but is no longer accessible to them, and appropriate measures are not being taken to ensure it can be used in this manner.

Examples for Clarity

To better understand this process, let’s look at some practical examples:

Example 1: A Construction Company

Imagine a construction company that purchases a property intended for its site managers to live in while working on various projects. To qualify for SDLT relief, the company must:

• Be actively engaged in construction work with the intent to earn a profit.
• Ensure that the property is made available to the site managers for their accommodation.
• Demonstrate that the accommodation is mainly for the employees’ use related to the business activities of the construction company.

If any of these factors change, such as moving the site managers to another location or allowing the property to remain unused, the relief from SDLT may be withdrawn.

Example 2: An IT Consultancy Firm

Consider an IT consultancy that secures a property for its employees who work remotely but occasionally come into the office. In this case, the firm must ensure:

• The business remains profitable and continues to operate.
• The property remains available for the employees to use for work-related purposes.
• The primary reason for the property’s availability is tied to the consultancy’s trade rather than just offering it as a regular rental property.

If they stop using the property for business or fail to provide it for the employees’ use, the SDLT relief status can be jeopardised, leading to potential tax implications.

Summary of Key Points

Here’s a quick recap of the critical points regarding the withdrawal of relief from SDLT:

• Relief is available for properties provided to employees or partners related to a trade.
• The relief can be withdrawn if the conditions are not met during the three-year control period.
• Key conditions include having an active trade, making the property available for work-related accommodation, and ensuring it serves a primary business purpose.
• Specific actions such as ceasing to make the property available or not using it for qualified purposes will result in withdrawal of relief.

Monitoring and Compliance

To avoid unintentional withdrawal of relief, it is important for businesses to continually monitor their compliance with the SDLT requirements. Here are some steps to consider for maintaining compliance:

• Regular Audits: Conduct periodic checks to ensure that the property is being used as intended and that all qualifying employees or partners have access.
• Documentation: Keep thorough records of all agreements made regarding the property and its use by employees or partners.
• Communication: Maintain open lines of communication with employees and partners regarding their use of the property to identify any changes in circumstances.

Conclusion

Understanding the conditions under which SDLT relief can be withdrawn is vital for businesses that own properties for the use of their employees or partners. By adhering to the key requirements and ensuring proper management of the properties, companies can avoid unnecessary tax liabilities.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09675 – 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:

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