HMRC SDLT: SDLTM09705 – 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: partnership transactions FA03/SCH15
Principles and Concepts of SDLT Higher Rate Charge
This section of the HMRC internal manual provides guidance on the application of the higher rate charge for Stamp Duty Land Tax (SDLT) on residential property acquisitions by certain non-natural persons, as outlined in FA03/S55/SCH4A. It also covers partnership transactions under FA03/SCH15.
- Explains when SDLT higher rate is applicable.
- Details the criteria for non-natural persons.
- Outlines the legislative framework governing these charges.
- Provides examples of partnership transactions subject to SDLT.
Understanding Higher Rate Stamp Duty Land Tax (SDLT) for Partnerships
What is the Higher Rate Charge?
Stamp Duty Land Tax (SDLT) is a tax you pay when purchasing a property in England. The higher rate charge applies to certain transactions, particularly when a partnership is involved.
When Does Higher Rate SDLT Apply?
– The higher rate charge applies when the chargeable amount for a transaction exceeds the higher rate threshold.
– A partnership may incur the higher rate charge if any member of the partnership would be liable for the higher rate if they were buying the property on their own or as a joint purchaser.
Partnership Transactions Explained
Partnership transactions are subject to the higher rate charge in two main situations:
1. When buying from a third party.
2. When special partnership rules apply, as outlined in FA03/SCH15. This includes transactions involving an interest that is valued above the higher rate threshold.
Transfer of Partnership Interests
The higher rate charge also applies in specific events related to partnership interests:
– If a partnership member transfers their interest according to regulations (paragraph 17(2)), this may attract the higher charge, especially if the partners include a corporate body.
– If their partner withdraws money or benefits from the partnership, this too may trigger the higher rate charge under paragraph 17A of Schedule 15 FA 2003.
Key Point About Economic Impact
The higher rate charge applies regardless of the actual transfer of economic value in a transaction:
– For example, if a company introduces a property into a partnership, even if the value appears to transfer from a corporation to an individual, the charge applies if the overall calculation for chargeable consideration exceeds the higher rate threshold.
Examples of Higher Rate SDLT Applications
Example 1: Two Individuals in a Partnership
– A partnership made up of two individual members purchases a property interest for £2.5 million.
– The 15% higher rate SDLT does not apply because neither member falls under the category that triggers the higher rate.
Example 2: Partnership of Individual and Company
– A partnership consisting of an individual and a company is engaged in property development.
– On 1 September 2014, they buy a property interest valued at £750,000 for the individual’s use.
– In this case, the 15% higher rate SDLT applies since the partnership includes a member who is subject to the higher charge.
Example 3: Equal Partnership Interest Value Below Threshold
– A partnership with an individual and a company holds equal shares.
– The company introduces a property interest worth £900,000 into the partnership on 1 April 2014.
– Here, the 15% higher rate SDLT does not apply, as the calculation shows chargeable consideration is £450,000, which is less than the £500,000 threshold.
Example 4: Equal Partnership Interest Value Above Threshold
– In a similar partnership setup, on 1 July 2014, the company brings in a property worth £1.2 million.
– The director of the company lives in this property.
– The higher SDLT charge of 15% applies because the consideration calculated is £600,000, exceeding the threshold.
Conclusion
Understanding when the higher rate SDLT applies in partnership transactions is key for individuals and companies involved in property dealings. Knowing which situations invoke this charge and calculating the chargeable consideration accurately can help in planning and managing costs effectively.
Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09705 – 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: partnership transactions FA03/SCH15
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