HMRC SDLT: SDLTM09720 – 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: transitional provisions – introduction of higher rate charge FA12/SCH35/PARA10

Principles and Concepts of Higher Rate SDLT Charge

This section of the HMRC internal manual explains the higher rate charge for Stamp Duty Land Tax (SDLT) applicable to certain non-natural persons acquiring residential property. It outlines transitional provisions and the introduction of the higher rate charge under FA12/SCH35/PARA10.

• Higher rate SDLT applies to non-natural persons.
• Transitional provisions are detailed.
• Introduced under Finance Act 2012, Schedule 35, Paragraph 10.
• Guidance is part of HMRC’s internal manual.

Understanding Stamp Duty Land Tax (SDLT): Higher Rate Charges for Certain Non-Natural Persons

Stamp Duty Land Tax (SDLT) is a tax on property transactions in the UK. When it comes to purchasing residential properties, specific rules apply, especially regarding the higher rates of SDLT for non-natural persons. This article explains when SDLT is charged and provides details about the higher rate charge.

What is SDLT?

Stamp Duty Land Tax is a tax that you pay when you buy a property or land over a certain price. The amount you owe depends on the price paid for the property. Depending on your circumstances, there can be different rates or exemptions.

Key Concepts

– Non-Natural Persons: These include entities like companies, partnerships, or collective investment schemes. These entities are treated differently from individuals regarding SDLT.
– Higher Rate Charge: There is a higher rate of SDLT (15%) that applies to certain non-natural persons purchasing residential properties. This rate applies in specific situations as outlined below.

When is SDLT Chargeable?

SDLT is chargeable when a transaction takes place that involves the purchase of land or property. However, specific rules apply to transactions that occur before and after March 21, 2012. Here are the essential points to consider:

Transactions Before 21 March 2012

– The higher rate charge does not apply to transactions where a contract was entered into and significantly performed before March 21, 2012.
– If a contract was signed and completed before this date, the standard rates apply unless certain conditions occur.

Conditions for Higher Rate Charge

Even if a contract was signed before March 21, 2012, the higher rate may apply if any of the following occurs:

– If there is a variation (change) to the contract on or after March 21, 2012.
– If there is an assignment (transfer of rights) of the contract on or after that date.
– If the transaction results from someone exercising rights on or after March 21, 2012, such as an option or right of pre-emption.
– If there is an assignment, sub-sale, or any other transaction related to the whole or part of the contract that leads to someone other than the original purchaser being entitled to call for a conveyance.

Deemed Land Transactions

In certain cases, such as the transfer of a partnership interest or withdrawal of money from a partnership following an acquisition, the 15% higher rate charge does not apply if the effective date of the partnership’s acquisition was before March 21, 2012. This means that if the partnership acquired the property before this date, they would not be subject to the higher rate when making subsequent transactions.

Examples

Here are a few scenarios to illustrate how these rules may be applied:

– Example 1: A company signs a contract to buy a residential property on 15 March 2012, and the transaction is completed the following month. Since the contract was signed before 21 March 2012, the higher rate does not apply.

– Example 2: An individual initially contracts to sell a property before 21 March 2012. However, they later make changes to the contract on 1 April 2012. Since a variation occurred after the deadline, the higher rate charge could be relevant.

– Example 3: A partnership acquires a property on 1 March 2012. Later, in June 2012, a partner withdraws funds from the partnership following the acquisition. Since the effective date of the partnership’s acquisition was before 21 March 2012, the higher rate does not apply to this withdrawal.

Important Legislation References

– FA03/S55/SCH4A: This section outlines the rules governing the higher rate charge.
– FA12/SCH35/PARA10: This piece of legislation introduces transitional provisions related to the higher rate charge. It explains how these rules work for transactions that might straddle the dates of the legislative changes.

Key Takeaways

Understanding the SDLT rules and how they apply can be complex, particularly for non-natural persons. It’s essential to consider:

– Whether the transaction occurred before or after 21 March 2012.
– Any variations or subsequent transactions that might trigger a higher rate charge.
– The specifics of each transaction to ensure compliance with HMRC guidelines.

By recognising these rules and understanding their implications, individuals and businesses can plan better for their property transactions and avoid unexpected costs.

Final Reminders

When dealing with SDLT matters and higher rates for non-natural persons, it is advisable to consult a tax professional or legal advisor to navigate the specific requirements of your situation. This guidance is crucial to ensure that all necessary steps are taken according to HMRC regulations and to avoid any potential penalties or overpayments.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09720 – 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: transitional provisions – introduction of higher rate charge FA12/SCH35/PARA10

View all HMRC SDLT Guidance Pages Here