HMRC SDLT: SDLTM09915 – SDLT – increased rates for non-resident transactions: Non-resident in relation to a chargeable transaction: Companies, second condition, non-UK control test – para 9 Sch 9A FA03
SDLT Increased Rates for Non-Resident Transactions
This section of the HMRC internal manual outlines the principles and concepts related to the increased Stamp Duty Land Tax (SDLT) rates for non-resident transactions. It focuses on the non-resident status in relation to chargeable transactions, specifically addressing companies under the non-UK control test.
- Explains the conditions under which a company is considered non-resident for SDLT purposes.
- Details the second condition involving non-UK control as per para 9 Sch 9A FA03.
- Provides guidance on how these rules apply to companies.
Understanding the Non-UK Control Test for SDLT
What is SDLT?
Stamp Duty Land Tax (SDLT) is a tax payable when you buy property or land in England and Northern Ireland. If you are a non-resident or if your company does not have UK control, different rates might apply.
Key Concepts
– Control: This refers to the ability to manage or influence a company. A person is considered to have control if they can direct the company’s decisions in any of the following ways:
– By controlling its operations directly
– Through voting rights
– By having a significant shareholding
– By influencing the company’s income
– By having a say over the company’s assets
– Non-UK Control Test: This is a specific assessment for companies involved in chargeable transactions under SDLT. The test examines whether a company meets the criteria of a close company, with some important adjustments laid out in the relevant legislation.
Close Company Rules
The rules for close companies are defined in Chapter 2 of Part 10 of the Corporation Tax Act 2010 (CTA 2010). A close company is generally one where five or fewer shareholders enjoy control. However, when dealing with SDLT, the non-UK control test modifies these definitions.
How the Non-UK Control Test Works
To see if a company passes the non-UK control test for SDLT, the following points are important:
– The term “participator” is replaced by “relevant participator.”
– Instead of looking for five or fewer participators, you consider any number of relevant participators.
– The application of certain sections of the CTA 2010 might change for SDLT purposes as follows:
– Modification under Section 439: Treat “participator” as “relevant participator” and count any number of them.
– Modified Section 444: This means that a company can be classified as a close company even if controlled by other non-close companies.
– Omitting Section 446: This inclusion allows certain kinds of public companies, where the public owns at least 35% of voting power, to be categorized as close companies under specific conditions.
– Adjustments from Section 451: Attributions of rights and powers will be subject to additional limitations defined in the non-UK control test guidelines.
Defining Relevant Participator
A ‘relevant participator’ is someone who is non-resident in relation to a chargeable transaction and is not a general partner in a limited partnership. The guidelines for determining non-residency involve using specific residence tests and recognizing any special rules that might apply.
Examples of Application
– Example 1: If Company A has multiple shareholders but all are based outside the UK, they may still be considered a close company under the non-UK control test due to the amendments in participator definitions.
– Example 2: If a public company (where at least 35% of shares are held by the public) is involved in a transaction, it could be classified as a close company under the new SDLT definitions, even though it might not typically meet the criteria without the modifications.
Key Sections in CTA 2010 Relevant to the Non-UK Control Test
– Section 439: Discusses participators and their influence on company control. For SDLT, this influences how we define control from a non-UK perspective.
– Section 444: This outlines conditions for company classification that have been adapted for SDLT purposes, allowing for more flexible control assessments.
– Section 446: Provides guidance on quoted companies and how public ownership affects close company status under SDLT.
– Section 451: Explains how rights and powers are attributed in a company context, though adjustments for SDLT testing apply.
Assessing Non-Residency
To determine if a participator is non-resident in relation to a chargeable transaction, apply the suitable residence test. This includes different rules based on geographical presence and operational ties to the UK.
– Presence: Where a participator lives or operates can heavily influence their residency status.
– Special Rules: Additional criteria may come into play, and they should be examined to ensure accuracy in residency assessments.
Final Considerations on the Non-UK Control Test
Understanding the non-UK control test is essential for businesses engaged in property or land transactions where SDLT applies. It requires careful interpretation of participation in company affairs, residency status, and control definitions to ensure compliance and correct tax treatment.
For further details, see the official guidelines at SDLTM09915 – SDLT – increased rates for non-resident transactions: Non-resident in relation to a chargeable transaction: Companies, second condition, non-UK control test – para 9 Sch 9A FA03.
Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09915 – SDLT – increased rates for non-resident transactions: Non-resident in relation to a chargeable transaction: Companies, second condition, non-UK control test – para 9 Sch 9A FA03
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