HMRC SDLT: SDLTM20700 – Zero carbon homes relief

Zero Carbon Homes Relief

This section of the HMRC internal manual provides guidance on the zero carbon homes relief. It outlines the principles and concepts related to tax relief for homes meeting zero carbon standards.

• Explains eligibility criteria for zero carbon homes relief.
• Details the process for claiming the relief.
• Provides examples of qualifying zero carbon technologies.
• Discusses the impact of zero carbon homes on tax liabilities.
• Offers guidance on maintaining compliance with HMRC regulations.

Zero Carbon Homes Relief

Zero carbon homes relief is a discount on stamp duty land tax (SDLT) for new homes that meet strict energy efficiency standards. This relief encourages the construction of environmentally friendly houses by reducing the tax burden for buyers.

Background of the Relief

This relief was initially announced in the 2007 Budget and came into effect on 1 October 2007. At first, it was applicable only to houses, but since August 2008, it also includes flats. As of now, all new zero-carbon homes (including flats) valued at less than £500,000 are completely exempt from SDLT. For homes priced over £500,000, the SDLT amount is lowered by £15,000.

The legal basis for this relief is found in sections FA03/S58A and 58B. The specific criteria for what constitutes a zero-carbon home and the assessment process for the relief are outlined in the Stamp Duty Land Tax (Zero-Carbon Homes Relief) Regulations 2007. These regulations were presented in Parliament on 18 October 2007 and took effect on 7 December 2007. Furthermore, the regulations specific to flats, the Stamp Duty Land Tax (Zero-Carbon Homes Relief) (Amendment) Regulations 2008, were presented on 22 July 2008 and became active on 13 August 2008.

Details of the Relief

The relief applies to the first purchase of any dwelling that qualifies as a zero-carbon home made between 1 October 2007 and 30 September 2012.

• If the purchase price is £500,000 or less, the buyer pays no SDLT.
• If the purchase price exceeds £500,000, the tax amount is reduced by £15,000.

It’s important to note that HM Revenue and Customs (HMRC) can refuse to grant this relief if they believe, based on reasonable grounds, that the home does not meet the specified zero-carbon standard. The criteria are defined within the Stamp Duty Land Tax (Zero-Carbon Home) Regulations 2007 (SI 2007/3437), requiring that a home’s carbon emissions from energy use be zero over an entire year. Additionally, sellers of new zero-carbon homes must provide a certificate confirming eligibility for this relief.

Understanding Zero Carbon Homes

A zero-carbon home is one that produces no net carbon emissions over a year. Such homes can be connected to the mains supply of electricity and gas, but they must be equipped with enough renewable energy sources to offset the average energy consumed throughout the year.

• To qualify as zero carbon, houses must be built with high energy efficiency standards. This includes having excellent insulation, such as triple-glazed windows and airtight constructions.
• They should also integrate renewable energy technologies, such as solar panels or wind turbines.

Proof of Compliance

Sellers of new homes claiming zero-carbon status must provide a certificate from an accredited assessor. This document confirms that the home meets the required standards for relief eligibility. Information on approved assessors can be found in regulation 2 of the Stamp Duty Land Tax (Zero-Carbon Home) Regulations 2007 (SI 2007/3437).

Typically, new homes are tested by accredited assessors to evaluate their energy performance before they can be sold. Often, this testing serves to determine if the home meets the zero-carbon standard. However, there may be cases where an additional assessment is necessary.

Criteria for Energy Efficiency

The home must satisfy the following key criteria:

• Heat Loss Parameter (HLP): The HLP must be no more than 0.8 Watts per square metre Kelvin (W/m²K). This measures how much heat escapes through the walls and windows.
• Dwelling CO2 Emission Rate (DER): The DER must be zero kilograms per square metre (kg/m²/year) when calculated over the course of a year. This indicates the efficiency of the home in terms of carbon emissions.
• Net CO2 Emissions: The total net CO2 emissions from the home must also be zero kilograms per square metre (kg/m²/year) annually.

In case of disputes about whether or not a home meets these standards, it is the responsibility of the purchaser to work with accredited assessors. HMRC will not intervene in matters related to the energy performance of buildings.

How to Claim the Relief

To claim the zero-carbon homes relief, the land transaction return must include a specific claim. This can be done easily by entering code 30 in the designated relief box on the return form.

• It is essential to complete the relevant sections of the return and ensure it is signed to process the claim successfully.
• If you are claiming full relief for a property under £500,000, there is no need to send any tax payment with the land transaction return.
• If you are seeking partial relief for a property valued above £500,000, you should include the tax payment for any amount above the £15,000 relief alongside the return.

Before making a claim, buyers should confirm that they are eligible for the relief and that all necessary conditions have been fulfilled. This will help ensure a smooth process and avoid any complications with HMRC.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM20700 – Zero carbon homes relief

View all HMRC SDLT Guidance Pages Here