HMRC SDLT: SDLTM20330 – Freeports and Investment Zones relief – withdrawal of relief – exceptions

Freeports and Investment Zones Relief – Withdrawal of Relief – Exceptions

This section of the HMRC internal manual outlines the exceptions to the withdrawal of relief in Freeports and Investment Zones. It provides guidance on specific scenarios where relief may still apply despite general withdrawal conditions.

  • Details on Freeports and Investment Zones relief policies.
  • Explanation of conditions under which relief is withdrawn.
  • Exceptions to the general withdrawal of relief.
  • Guidance for HMRC staff on applying these exceptions.

SDLTM20330 – Freeports and Investment Zones Relief: Withdrawal of Relief – Exceptions

This article explains the circumstances under which relief from Stamp Duty Land Tax (SDLT) will not be withdrawn for land in Freeports and Investment Zones. Understanding these exceptions is important for purchasers to ensure they comply with regulations and do not inadvertently lose their relief.

When Relief Won’t Be Withdrawn

Relief from SDLT will remain in place if certain conditions are met during the control period, which is the time frame when the land must be used in a qualifying way. Here are the key circumstances where relief will not be withdrawn:

  • Unforeseen Changes in Circumstance
  • If it is not reasonable to expect the land to be used solely for a qualifying purpose due to unexpected events that are out of the purchaser’s control, the relief will continue. This means that if something happens that stops the intended use of the land and that event could not have been anticipated, the purchaser will not lose their relief. For example, if the purchaser intended to build on the land, but a sudden and unexpected legal issue arises regarding the land title, the relief remains intact.

  • No Use Has Started
  • If the purchaser has not yet begun using the land in a qualifying manner but has taken reasonable steps to initiate that use, the relief remains. For example, suppose a purchaser has acquired land and has already applied for necessary planning permissions and is waiting for approval. In this case, since they are actively working towards qualifying use, relief will be preserved even though use has not yet commenced.

  • Use Ceased but Efforts to Resume are Underway
  • Relief will also continue if the land was previously used in a qualifying manner but that use has stopped, and the purchaser is actively trying to either restart that use or sell the land. An example could be if a factory on the land has closed due to market conditions, but the purchaser is seeking new tenants or is in negotiations to sell the property to another buyer who intends to use it for a qualifying purpose. As long as reasonable efforts are being made to address the situation, such relief will not be withdrawn.

Examples of Valid Exceptions

Here are some specific examples that illustrate the points mentioned above:

  • Contaminated Land
  • Imagine a situation where a purchaser buys a piece of land with plans to develop houses. However, upon starting the process, they discover that the land is contaminated. The contamination was not known prior to the purchase, and it prevents them from starting any development work. In this case, the purchaser is taking reasonable steps to address the contamination (such as hiring environmental consultants). The relief from SDLT will not be withdrawn because the situation was unforeseen and beyond their control.

  • Natural Disaster
  • Consider a scenario where a purchaser intends to use a property for a café. However, a significant flood occurs shortly after purchase, rendering the premises unusable for many months. If the purchaser takes steps to clean up and repair the damage and has a clear plan for when the café can reopen, their relief from SDLT would not be affected. This is because the situation was beyond their control and they are actively working to return the property to a qualifying use.

  • Ceased Operations Due to Market Changes
  • In another example, a company buys a warehouse intending to use it for storage. If the company experiences financial difficulties and has to cease operations, it is still allowed to maintain the relief from SDLT, provided they are trying to sell the property to another business that can use it as a warehouse or storage facility. This shows that even if use has ceased, taking action to resume or transfer the property’s qualifying use is vital for maintaining relief.

Additional Points to Consider

While the above scenarios illustrate clear exceptions, it is essential for purchasers to document their situation thoroughly and keep records of the steps they are taking. This documentation may be needed to support their case for continuing relief should HMRC request it. Here are some practical tips:

  • Keep Written Records: Document all communications with relevant authorities (e.g., planning departments) and keep copies of applications, approvals, and any other significant correspondence.
  • Maintain a Timeline of Events: Create a timeline that details all important events occurring after the land purchase, especially those that impact the planned use. This helps clarify what unforeseen circumstances occurred.
  • Engage Professionals: Seek advice from legal and tax professionals when navigating complex situations, especially in cases of contamination or if facing market changes that affect the operation status of the property.

Final Considerations

Purchasers must recognize that while there are provisions to protect them from losing relief under certain circumstances, proactive measures are essential. Regularly reviewing and managing their plans with respect to the land ensures they remain within compliance for SDLT relief in Freeports or Investment Zones.

For more details regarding SDLT relief and its stipulations, feel free to explore additional resources or consult experts in the field.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM20330 – Freeports and Investment Zones relief – withdrawal of relief – exceptions

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Written by Land Tax Expert Nick Garner.
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