HMRC SDLT: SDLT No Longer Applies to Scottish Land Transactions from April 2015
SDLTM18000 – Chargeable Consideration: Contents
This page discusses the concept of chargeable consideration in the context of Stamp Duty Land Tax (SDLT). It notes that from April 2015, SDLT no longer applies to land transactions in Scotland, which are now subject to the land and buildings transaction tax.
- Chargeable consideration is a key concept in SDLT.
- SDLT was replaced by land and buildings transaction tax in Scotland from April 2015.
- The page is archived and no longer updated.
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Read the original guidance here:
HMRC SDLT: SDLT No Longer Applies to Scottish Land Transactions from April 2015
Understanding Chargeable Consideration in SDLT
What is Chargeable Consideration?
Chargeable consideration is an important concept in Stamp Duty Land Tax (SDLT). It refers to the total amount paid or agreed to be paid for a land transaction. This includes:
– Money given as payment
– Any other benefits received (like property or other goods)
The idea is to calculate how much stamp duty you need to pay based on this total amount.
How is Chargeable Consideration Calculated?
Here are the main factors that go into calculating chargeable consideration:
1. Monetary Payments: This is the most straightforward part. If you pay a certain amount of money for the property, that figure is included as chargeable consideration.
2. Non-Monetary Consideration: If any part of the payment includes items other than cash, such as assets, these values need to be added to the total. For instance, if you trade a vehicle worth £10,000 as part of the deal for a piece of land priced at £200,000, the total chargeable consideration would be £210,000.
3. Liabilities: Sometimes you might take on debts or obligations as part of the purchase. If a seller has an outstanding mortgage on their property that you agree to pay as part of the transaction, this amount is also counted.
4. Discounts and Promotions: If you receive discounts from the seller or if the property transaction has special arrangements that reduce the payment, these need to be handled carefully. The ultimate payment before any discounts applies represents the chargeable consideration.
5. Conditional Payments: Occasionally, payments may depend on certain conditions. For example, you might agree to pay extra only if specific events happen in the future. If this relates to the consideration of the property, it will usually be included in the chargeable consideration.
What Happens During a Joint Purchase?
When property is bought jointly, it is important to understand how chargeable consideration is shared:
– Each person’s share of consideration is calculated based on their contribution. If two people buy a house for £300,000 split equally, each person’s chargeable consideration would be £150,000.
– If one party contributes more, that amount should be reflected in the chargeable consideration. So, if one person paid £200,000 and the other paid £100,000, their respective chargeable considerations would be £200,000 and £100,000.
Consideration in Different Situations
Chargeable consideration is not just for straightforward purchases. Here are some specific scenarios where chargeable consideration still matters:
1. Gifted Properties: If you receive property as a gift, the stamp duty tax is based on the market value rather than the actual consideration. For example, if a property worth £250,000 is gifted to you, the chargeable consideration is £250,000, even if you paid nothing for it.
2. Lease Transactions: When entering a lease agreement, chargeable consideration can arise from rent and other payments due during the lease. For instance, if you sign a 10-year lease with payments of £20,000 per year, the chargeable consideration may include the total expected rent.
4. Exchange of Property (Swap Deals): If you swap a property with someone else, each property’s market value contributes to the chargeable consideration. If your home is worth £300,000 and you exchange it for a property valued at £350,000, the chargeable consideration is based on the fair market values of both properties.
5. Transfers Between Family Members: In family situations, such as a parent transferring a house to their child, the chargeable consideration typically reflects the property’s market value even if no payment is made. If a property worth £400,000 is transferred without any money changing hands, you would still base the SDLT on £400,000.
Special Cases
Certain scenarios require special attention when calculating chargeable consideration:
1. Subsidies and Protective Arrangements: If the seller provides financial support as a condition of the transaction, this needs to be included in your calculations. For example, if a buyer receives £25,000 towards their purchase price, this amount should be added to the chargeable consideration.
2. Complicated Agreements: If the transaction involves complicated bespoke agreements that modify the price or terms significantly, seek advice to ensure you correctly determine the chargeable consideration. For instance, deferment of part of the payment or a payment linked to performance could complicate matters.
3. Immediate and Future Payments: If payments are made at different times—some upon settlement and others later—it’s essential to evaluate all anticipated payments to understand the total chargeable consideration.
How Does One Report Chargeable Consideration?
When it comes to reporting your transaction to HMRC, it is important to follow these steps:
– Form Submission: You need to fill out an SDLT return. This is a form where you declare all aspects of the chargeable consideration, including any exemptions or reliefs that might apply.
– Payment of Tax: You must ensure you pay any stamp duty tax that is due. This amount is calculated based on the total chargeable consideration minus any reliefs you claim.
– Deadline for Submission: The SDLT return and payment of any tax due should be made within 14 days of the completion of the property transaction. Failure to do so can lead to penalties, so keeping tabs on dates is vital.
Calculating SDLT Rates
To determine how much SDLT you owe based on the chargeable consideration, you need to refer to the SDLT rates. Here is how it works:
1. New Property Purchases: The rates are tiered. Each tier applies to the portion of the purchase price that falls within its range. For example, if you purchase a house worth £500,000, the first £125,000 may be taxed at a lower rate, the next £125,000 at a higher rate, and so on.
2. Additional Dwellings: If the property purchase is an additional property—like a second home or buy-to-let—the rates differ. You might pay an extra percentage on the total chargeable consideration compared to your first property purchase.
3. Reliefs and Exemptions: As part of calculations, you should be aware of any reliefs you might qualify for. For example, if you’re a first-time buyer, there might be relief available which can lower the chargeable amount for SDLT.
Useful Links for Further Information
For more details on specific regulations and cases related to chargeable considerations, you can refer to the following:
– For specific guidance on SDLT and its applicability: SDLTM0000
– For further detailed regulations regarding property purchases: SDLTM18000
– For information on exemptions and reliefs related to SDLT: SDLTM20000
Remember to obtain professional advice if you have specific queries, as property law and taxation can get complex.
Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLT No Longer Applies to Scottish Land Transactions from April 2015
