Read the original guidance here:
HMRC SDLT: SDLTM50320 – Procedure: Uncertain rent becomes certain – FA03/Sch17A/Para8

Understanding SDLTM50320 – Procedure for Adjusting Estimated Rent

When a transaction relating to Stamp Duty Land Tax (SDLT) occurs, it may often involve estimating rent. There are specific procedures to follow when the actual rent differs from the initial estimate. This article explains the process when uncertain rent becomes certain, based on FA03/Sch17A/Para8.

Types of Original Transactions

There are three main scenarios to consider regarding transactions when the estimated rent changes to an actual figure. Each scenario requires a different approach.

Scenario 1: No Tax Due on Original Transaction

If the original rental figure was estimated to be below the tax threshold and no tax was payable, the situation will change if the actual rent is confirmed to be higher.

Steps to Follow:

1. Determine Actual Rent: Now that the rent is known to be higher than the estimated amount, you need to report this change.

2. Send a Letter to the Stamp Office: You must send a letter that includes:

– The Unique Taxpayer Reference Number (UTRN) from the original SDLT return.
– Details of the actual rent amount.
– A self-assessment of the SDLT due, based on this new rent figure.
– Payment for any outstanding tax.

Scenario 2: Tax Paid on Original Transaction

In this case, you initially estimated the rent and paid SDLT based on that estimate. When the actual rent is different from what you initially reported, you cannot ignore this change.

Steps to Follow:

1. Understand Rent Change: Confirm the actual rent amount following your initial estimation.

2. Send a Letter to the Stamp Office: You should send a detailed letter containing:

– The UTRN of the original return you submitted.
– The details of the actual rent amount.
– A self-assessment of whether more tax is due or not.
– Payment of any additional tax if the new estimate indicates that the previous one was too low.
– Alternatively, if the initial estimate was too high, you may submit a claim for a tax refund.

Scenario 3: Transaction Not Notifiable Due to Low Estimated Rent

If the estimated rent at the time of the original transaction was below the notification threshold, specific actions are necessary based on the actual net present value (NPV) of the rent.

Actions to Consider:

1. Evaluate the Actual NPV: If the actual NPV remains below the notification threshold that was effective on the transaction’s date, you do not need to take any further action.

2. Complete an SDLT1: If the actual NPV exceeds the threshold, you must:

– Complete an SDLT1 form with all relevant details about the transaction.
– Ensure that the rents included are the actual rents.
– Use the effective date of the original transaction while filing the form.
– Note that penalties will not be applied if you submit this form within 30 days of knowing the actual rent amount.

Important Update (From 1 March 2019):

– The penalty-free period was shortened from 30 days to 14 days if you complete the SDLT1 within this timeframe after confirming the actual rent.

Understanding Interest Charges

Interest may accrue due to changes linked to underestimating or overestimating the rent in the original transaction.

Key Points:

– Underestimation: If you have underpaid SDLT due to a rent underestimation, interest will start to accrue 30 days after the original effective date of the transaction.

– Overestimation: Conversely, if you initially overestimated the rent and are now due a refund, interest on this refund will start from the date HMRC receives your claim.

Update (From 1 March 2019):

– The same 14-day condition now applies to interest on underpaid SDLT due to underestimations; interest starts from 14 days post the original effective date.

Conclusion

In summary, knowing how to proceed when the actual rent figure differs from your original estimate is essential in fulfilling your SDLT obligations. Each scenario—whether tax was due or not, and whether it has been paid—has specific guidelines. Ensure all relevant details are included in your communication with the Stamp Office to avoid unnecessary liabilities or penalties.