HMRC SDLT: SDLTM09700 – 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: alternative finance arrangements – withdrawal of relief FA03/SCH4A/PARAS 6D-6I

Principles and Concepts of SDLT Chargeability

This section of the HMRC internal manual discusses the conditions under which Stamp Duty Land Tax (SDLT) is chargeable, particularly focusing on higher rate charges for certain non-natural persons acquiring residential property. It also covers the withdrawal of relief under alternative finance arrangements.

• SDLT is applicable to property acquisitions by non-natural persons.
• Higher rate charges are specified under FA03/S55/SCH4A.
• Alternative finance arrangements can affect SDLT relief.
• Withdrawal of relief is detailed in FA03/SCH4A/PARAS 6D-6I.

Understanding Stamp Duty Land Tax (SDLT) and Alternative Finance Arrangements

What is Stamp Duty Land Tax (SDLT)?

Stamp Duty Land Tax (SDLT) is a tax that applies when you buy property or land in England and Northern Ireland. The amount of SDLT you pay depends on the price of the property and any applicable reliefs or exemptions. It’s important to understand when SDLT is chargeable, especially in cases involving specific arrangements, such as alternative finance arrangements.

When is SDLT Chargeable?

SDLT is generally chargeable when you acquire a property or land. However, there are certain circumstances where the higher rate of SDLT may apply, particularly when certain non-natural persons are involved. Non-natural persons include companies, partnerships, and similar entities, rather than individual buyers.

The Higher Rate of SDLT for Certain Non-Natural Persons

In some situations, when a non-natural person acquires residential property, they may be liable for a higher rate of SDLT. The conditions under which this applies can be complex, and it’s crucial to understand whether you qualify for a lower rate or any exemptions.

Control Period and Relevant Persons

For transactions using alternative finance arrangements, a control period of three years begins from the effective date of the transaction. This period is significant for determining whether the higher rate of SDLT applies or if reliefs can be withdrawn.

The key aspect is to look at the situation from the viewpoint of the ‘relevant person’. This is the individual or entity, excluding financial institutions, that has entered into the alternative finance arrangements. There are many factors to consider, including:

• Whether a change in circumstances was expected
• If the change was beyond the control of the relevant person

Relevant Interests During the Control Period

For property used in a business, such as letting or trading, the relevant interest must remain in the possession of the relevant person throughout the control period of three years. Understanding what a ‘relevant interest’ means is vital:

• It can mean the interest acquired in what’s known as the ‘second transaction’.
• It also refers to interests purchased jointly by a financial institution and another person.
• Interests transferred to the relevant person due to rights exercised under the alternative finance arrangements.
• Any chargeable interest that comes from the aforementioned interests.

Withdrawal of Relief from SDLT

In certain cases, if specific conditions aren’t met, reliefs that were originally granted can be withdrawn. This applies chiefly to the relevant person. The onus to report further details in such cases lies with the relevant individual or entity rather than the financial institution. Financial institutions often handle the tax return for the initial transaction, but if conditions change later, it’s the responsibility of the relevant person to update HMRC.

Key Points to Remember

• SDLT applies to property and land acquisitions, and certain higher rates for non-natural persons may apply.
• The control period lasts three years from the effective date of a transaction.
• The relevant person is the focus for considering any changes in circumstances and when assessing the implications of SDLT.
• Relevant interests must be maintained throughout the control period to avoid withdrawal of relief.
• It is the responsibility of the relevant person to report any changes that may affect SDLT obligations.

Further Information on Alternative Finance Arrangements

Alternative finance arrangements can take many forms and are often used by businesses to acquire properties. Understanding the implications of these arrangements on SDLT is important for compliance and financial planning. The regulations surrounding alternative finance are designed to ensure that SDLT is applied fairly and consistently, where applicable.

Considering the complexity of these regulations, those engaging in property transactions or using alternative finance arrangements should seek professional advice. This ensures all tax obligations are met and any reliefs are claimed correctly. Mistakes in understanding the SDLT implications can lead to unexpected costs and complications.

Resources for More Information

For further reading and specific instance queries, visit the HMRC guidance on SDLT and alternative finance arrangements. Visit this link for an overview: SDLTM09700 – Scope: when is Stamp Duty Land Tax (SDLT) chargeable.

Engaging with local tax professionals who are up to date with the latest SDLT rules can be an asset as they can provide tailored advice based on individual circumstances, especially for those involved in transactions that utilise alternative finance arrangements.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09700 – 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: alternative finance arrangements – withdrawal of relief FA03/SCH4A/PARAS 6D-6I

View all HMRC SDLT Guidance Pages Here