Read the original guidance here:
HMRC SDLT: SDLTM31920 – Application – Powers of Attorney and SDLT

Powers of Attorney and SDLT

When someone needs to declare details in a land transaction return using a Power of Attorney, there are specific rules they must follow. This applies in different parts of the UK, like England, Northern Ireland, and Scotland. Here’s how it works:

Valid Power of Attorney

To be valid, a Power of Attorney must meet certain requirements:

• It must be legally valid. This means it should be created correctly according to the law.
• It must allow the attorney to handle SDLT issues. This is important so that there is no confusion about what the attorney can do.

HMRC usually wants to see that SDLT matters are mentioned directly in the deed, which is the legal document that outlines the Power of Attorney. If this isn’t clear, HMRC may think that the taxpayer didn’t intend to give their attorney this authority or that the taxpayer didn’t fully understand what they were doing.

Who Can Sign?

If there is no valid Power of Attorney that includes the authority to manage SDLT issues, only the buyer(s) of the property can sign the land transaction return. This means that if you’re a buyer but have not set up a proper Power of Attorney, you cannot have someone else sign for you.

Mortgage Terms and Conditions

It’s not uncommon for mortgage lenders to include a section about Power of Attorney in their contracts. However, HMRC has noticed that sometimes these sections don’t meet the requirements of the Powers of Attorney Act of 1971 or its equivalents. They often fail to mention SDLT matters explicitly.

If a mortgage provider or their agent tries to submit a land transaction return based on a Power of Attorney that doesn’t meet the legal standards, HMRC will not accept this. They cannot share confidential tax information with mortgage providers in these cases. Compliance with section 18 of the Commissioners for Revenue and Customs Act 2005 means that taxpayer information is kept strictly confidential. It can only be shared under specific legal conditions.

Rectifying an Invalid Power of Attorney

Suppose there is an invalid Power of Attorney but a court has ordered a correction. In that case, the court can allow HMRC to share information about the taxpayer, provided the court judges it appropriate to do so. If this happens, HMRC will follow the court order and will accept the land transaction return that is filed under the corrected Power of Attorney.

Example of Power of Attorney in Action

Let’s consider an example to clarify things:

Imagine John is buying a house. He lives abroad and decides to give his brother Mike the Power of Attorney to handle the transaction for him. John needs to ensure the Power of Attorney:

• Is legally valid as per the requirements.
• Specifically mentions Mike’s authority to deal with SDLT and land transaction returns.

If John does not include SDLT in the Power of Attorney, Mike cannot sign the land transaction return. John needs to do this to ensure that all the legal formalities are respected, and HMRC will not question Mike’s authority.

Understanding SDLT

Stamp Duty Land Tax, or SDLT, is a tax that buyers pay when purchasing residential or commercial property over a certain price threshold. Here are the key points regarding SDLT:

• Thresholds: SDLT is charged on properties that exceed specific price limits. The rates may change, so it’s essential to check the latest guidance.
• Payment Deadline: Buyers must pay SDLT within a set timeframe after the property purchase. Failing to do so may lead to penalties.
• Rebates and Reliefs: There are instances where buyers can claim reductions or exemptions from SDLT, for example, when purchasing first homes or certain types of properties.

Preparing for SDLT Payments

When a Power of Attorney is involved, it’s also vital to ensure that all paperwork is correctly completed, and payments of SDLT are timely. This means:

• Gathering accurate property details, including the purchase price.
• Checking if any rebates or reduced rates apply to the transaction.
• Ensuring that the Power of Attorney explicitly covers the completion and submission of the SDLT return.

Implications of an Invalid Power of Attorney

If someone attempts to use an invalid Power of Attorney, there are significant risks:

• Tax Compliance Issues: Without the proper authority, any submission may be rejected by HMRC, leading to compliance issues.
• Legal Repercussions: Using an invalid Power of Attorney could also lead to legal disputes, especially if issues arise regarding property ownership or tax liabilities.
• Extra Costs: Correcting errors or resolving disputes can lead to additional costs, both financial and time-wise.

Documenting SDLT Transactions

Proper documentation is essential when dealing with SDLT. Here are some steps to ensure everything is recorded accurately:

• Keep Copies: Always keep copies of the completed SDLT return, the Power of Attorney, and any correspondence with HMRC related to the transaction.
• Review Regularly: It’s good practice to regularly review your records to ensure all documents are up to date and accurately reflect the transactions.
• Consult Professionals: If you are unsure about any aspect of SDLT or Powers of Attorney, get advice from legal or tax professionals. They can clarify requirements and help avoid mistakes.

Conclusion on Powers of Attorney and SDLT

Understanding how Powers of Attorney interact with SDLT is vital for a smooth property transaction. Following all legal requirements ensures that everything is completed correctly and avoids potential legal or tax-related issues in the future. Always ensure clarity in the documents and seek advice if in doubt.