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HMRC SDLT: SDLTM50250 – Procedure: Completion following Substantial Performance of agreement for sale

SDLTM50250 – Procedure: Completion Following Substantial Performance of Agreement for Sale

When a freehold property sale agreement or an assignment of a lease is mostly finished, it may require further action regarding tax. This is crucial to ensure everything is accounted for correctly.

Understanding Substantial Performance

Substantial performance means that most of the obligations in the sale agreement have been fulfilled. It does not mean that everything is complete, but the crucial parts of the transaction are done. Examples of substantial performance include:

• The seller has transferred the property.
• The buyer has taken possession of the property.

Need for a Further Return

After substantial performance, when the transaction is actually completed, there may be a need for a further tax return. This means you must check if any changes occurred between substantial performance and the final completion that affect the tax amount. Changes can involve:

• Alterations in the sale price.
• Amendments in the property details, such as size or conditions.

If there has been a change that results in a different tax amount, you must submit a further return.

How to Submit a Further Return

A further return is typically sent as a letter to the Stamp Office. Below are key details that you must include in your letter:

• UTRN of Original Return: If you submitted a first return, include the Unique Taxpayer Reference Number (UTRN) from that.
• Details of the New Calculation: Provide the revised figures that explain how the new tax was calculated based on the latest information.
• Payment for Additional Tax: If the new calculation shows more tax is due, make sure you include a payment for the extra amount.
• Refund Claims: If the new calculation indicates that you have overpaid, you should include a claim for the refund.

Interest on Unpaid Tax

It is important to be aware that if any tax remains unpaid for more than thirty days after the actual completion, interest will be charged. This means:

• If you owe extra tax and do not pay it within thirty days, you will have to pay interest on that amount.

Repayments and Interest

When you are due a repayment of tax—as in the case of overpayment—HMRC will pay you back with additional interest from the date they received your original tax payment. This means:

• If you overpay, not only will you get your money back, but you will also receive interest for the time the funds were held by HMRC.

This process is designed to ensure that you accurately report your tax obligations and that both sides—the taxpayer and HMRC—comply with the agreed terms of the transaction.

Important Considerations

When dealing with further returns and tax obligations, keep these points in mind:

• Always double-check your calculations. Errors can lead to incorrect tax amounts, which may cause penalties or delays in processing.
• Track any changes closely between substantial performance and actual completion to ensure you adjust your tax calculations accordingly.
• Stay informed about deadlines for making payments or submitting returns to avoid incurring interest or fines.