HMRC SDLT: SDLTM19300 – Reliefs and exemptions

Principles and Concepts of Reliefs and Exemptions

This section of the HMRC internal manual provides guidance on reliefs and exemptions available under SDLT (Stamp Duty Land Tax). It outlines the principles and concepts necessary for understanding and applying these tax reliefs effectively.

• Defines the scope of SDLT reliefs and exemptions.
• Explains eligibility criteria for various reliefs.
• Details the application process for claiming exemptions.
• Provides examples to illustrate the use of reliefs.
• Updates on recent changes in legislation affecting SDLT.

SDLTM19300 – Reliefs and Exemptions

The Stamp Duty Land Tax (SDLT) is a tax you’ll pay when you buy property or land in the UK. However, there are various reliefs and exemptions designed to reduce or eliminate the amount of SDLT you might have to pay, depending on your specific circumstances. This guide explains the main types of reliefs and exemptions available, who they apply to, and how to claim them.

Types of Reliefs

There are several key types of reliefs that can lower your SDLT bill:

• First-Time Buyers Relief: This relief applies if you are buying your first home. If the property value is under a certain threshold, you might not pay any SDLT at all. The current threshold is £425,000 for properties in England and Northern Ireland. If the property price exceeds £425,000 but is below £625,000, you may pay a lower rate than standard SDLT.
• Purchasing a Property in Disrepair: In some cases, if the property being purchased has significant repair issues, the purchase price can be adjusted, leading to a lower SDLT charge. You need to provide evidence that the property is uninhabitable or requires considerable repairs.
• Multiple Dwellings Relief (MDR): If you buy more than one residential property in a single transaction, you may be eligible for MDR. This relief can reduce the total SDLT charge by averaging the price across all properties. It applies whether you purchase two or several properties at once.
• Charities Relief: Charitable organisations can access relief from SDLT when acquiring property. To qualify, the charity needs to meet specific criteria regarding its operations and the purpose of the property purchase.
• Existing Property Transfers between Connected Persons: If you transfer a property between family members or connected persons, you might not have to pay SDLT under certain conditions. The property must be sold for a nominal amount, and proper documentation must be in place to substantiate the transfer.

Key Principles Behind Reliefs

The reliefs offered under SDLT exist to support specific groups and transactions. Here are some fundamental concepts associated with these reliefs:

• Eligibility Criteria: Each relief has its own set of eligibility requirements that must be met. It is essential to check if you qualify before making a property transaction.
• Claim Process: Not all reliefs are applied automatically. In many cases, you need to actively claim the relief as part of your SDLT return. Ensure that you complete forms correctly and provide all necessary information and documentation.
• Document Retention: When claiming relief, keep all records and documents related to the property purchase. This includes contracts, sale agreements, and evidence supporting your eligibility for relief. You may need these in case HMRC asks for clarification.

Common Exemptions

In addition to reliefs, there are situations where you may be exempt from paying SDLT altogether. Key exemptions include:

• Gifts of Property: If you receive property as a gift (without any money exchanging hands), you typically do not need to pay SDLT. However, you should determine if the gift has any potential capital gains tax implications.
• Transfers under a Court Order or Statutory Duty: If a property transfer occurs due to a court order (like a divorce settlement) or as part of a statutory duty (such as transfers to manage an estate), SDLT may not be applicable.
• Low-Value Transactions: If you purchase a property for a low amount (below the SDLT threshold), you will not be required to pay SDLT. As of now, the threshold stands at £125,000 for residential properties in England and Northern Ireland.
• Transfers of Property by a Company: In some cases, when companies transfer property to another company as part of a restructuring, the transaction might not be subject to SDLT, provided certain conditions are satisfied.
• Transfers of National Trust Properties: Gifts of property to the National Trust or similar institutions may be exempt from SDLT. This is part of a broader initiative to promote heritage preservation.

How to Claim Reliefs and Exemptions

Claiming reliefs and exemptions is a straightforward process but must be done correctly to avoid issues later. Here’s a step-by-step guide on how to do it:

1. Identify Your Eligibility: Before you submit an SDLT return, carefully review the reliefs and exemptions applicable to your situation. Use official resources or seek advice from a tax professional if you are unsure.
2. Fill Out the SDLT Return: When completing your SDLT return, ensure you clearly indicate which relief or exemption you are claiming. Use the correct boxes and provide all necessary information.
3. Provide Supporting Evidence: Attach any necessary documentation that proves your eligibility for the relief or exemption you are claiming. This can include contracts, evidence of property conditions, or documents showing your status as a first-time buyer.
4. Submit Your SDLT Return: Ensure that your return is submitted on time. If you are claiming relief, submit it within 14 days of the transaction to avoid penalties.
5. Retain Copies: Keep copies of your submitted SDLT return and all supporting documents. This is crucial should HMRC review your claim or requests further information in the future.

Things to Consider

Before engaging in property transactions and claiming reliefs or exemptions, consider the following:

• Changes in Legislation: Tax laws and SDLT rates can change. Stay informed about any updates that may impact how reliefs and exemptions are applied.
• Consult Professionals: If you are unsure about the reliefs that apply to your situation, consider seeking help from tax professionals. They can help clarify complex points and ensure you are taking advantage of available reliefs.
• Be Aware of Time Limits: There are strict deadlines for submitting SDLT returns and claiming reliefs. Keep track of important dates to ensure compliance and avoid financial penalties.

Examples of Relief Applications

To make understanding reliefs and exemptions clearer, here are examples of how they might apply in real-life scenarios:

• Example of First-Time Buyer Relief: Sarah is purchasing her first home for £300,000. Because the property price is below the £425,000 threshold, she does not need to pay any SDLT on this purchase.
• Example of Multiple Dwellings Relief: John buys two houses for £300,000 each in the same transaction. Without MDR, John would have to pay SDLT on each home separately. However, with MDR, the total SDLT is calculated based on the average property price, which could lead to significant savings.
• Example of a Gift: Emily receives a property from her grandmother as a gift. Since there was no purchase involved, Emily is not liable for any SDLT on this transaction.
• Example of Charities Relief: A registered charity purchases a building for its operations. As long as the charity meets specific criteria, it may

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