HMRC SDLT: Guidance on SDLT Procedures for Later Linked Property Transactions
Procedure for Later Linked Transactions under Section 81A Finance Act 2003
This section outlines the procedures for handling later linked transactions under Section 81A of the Finance Act 2003. It explains the steps required when an original transaction, initially not requiring tax payment, becomes liable due to a subsequent transaction. The process involves revisiting the original return, submitting necessary documentation, and ensuring timely tax payment.
- Original transaction notified but no tax due; later transaction requires revisiting the original return.
- SDLT1 form needed for subsequent transactions.
- Further return involves a letter to the Stamp Office with UTRN and transaction details.
- Self-assessment of tax due and payment within 30 days of the later transaction.
- If original transaction was not notifiable, notification may now be required.
- From 1 March 2019, returns must be made within 14 days if the original transaction becomes notifiable.
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Read the original guidance here:
HMRC SDLT: Guidance on SDLT Procedures for Later Linked Property Transactions
Understanding Later Linked Transactions Under SDLT
Overview
The Stamp Duty Land Tax (SDLT) rules set out how property transactions are taxed in the UK. Sometimes, transactions can be linked, which means that the details of the original transaction may need to be revisited. This can happen for several reasons, such as a change in the financial outcome of a subsequent transaction. The following sections explain how to handle these linked transactions, particularly when a new one occurs after an original transaction.
1. Original Transaction Notified but No Tax Due
When you first report a property transaction using the SDLT1 form but no tax is due because the consideration (the amount paid for the property) was below the tax threshold, the following steps must be taken if a later linked transaction occurs:
– First Transaction:
– The property deal was reported via an SDLT1 return.
– No SDLT was owed because the deal was below the specified tax threshold.
– Later Linked Transaction:
– A new transaction arises that requires you to reassess the original return. If this new transaction results in tax becoming due, you need to act quickly.
– Actions Required:
– You must submit a new SDLT1 form for the subsequent transaction.
– Write a letter to the Stamp Office regarding the original transaction. This letter must include:
– The Unique Taxpayer Reference Number (UTRN) of the original return.
– Clear details of the consideration on the new transaction.
– A self-assessment of any tax now owed.
– Ensure you pay any due tax within 30 days of the linked transaction taking place.
2. Original Transaction Notified and Tax Paid
In some cases, the original transaction was correctly reported, and tax was paid at the applicable rate. If a later linked transaction occurs that requires additional tax to be paid, follow these steps:
– First Transaction:
– The transaction was declared using the SDLT1 form, and you paid the appropriate tax at the time.
– Later Linked Transaction:
– This new transaction means you need to review the original transaction. If more tax is now due as a result, you’ll need to adjust your reporting.
– Actions Required:
– File a new SDLT1 form to report the follow-up transaction.
– Submit another letter to the Stamp Office concerning the original transaction, which must include:
– The UTRN of the initial return.
– Full details of the consideration on the subsequent transaction.
– An assessment of any additional tax owed.
– Make sure to pay the extra tax within 30 days following the later linked transaction.
3. Original Transaction Was Not Notifiable
In situations where the original deal was not reported because it fell below the notification threshold, later linked transactions may require you to notify HMRC:
– First Transaction:
– This transaction did not need to be reported as it did not meet the criteria for notification.
– Later Linked Transaction:
– A new transaction occurs, which for the first time makes the original deal notifiable. This means you may need to file a return and pay additional tax.
– Actions Required:
– If notification is required:
– File an SDLT1 form for the later transaction as you normally would.
– You must also submit an SDLT1 for the original transaction to report it now. This should be sent to the Stamp Office, along with a letter containing:
– The UTRN of the new transaction’s return.
– Clear details about the consideration of the later linked transaction.
– A self-assessment of any additional tax now due.
– Pay the applicable tax within 30 days of the later linked transaction.
Timelines for Notifications
As of 1 March 2019, if the original transaction becomes notifiable for the first time due to a later linked transaction, you must take action promptly:
– File the required return and pay the tax within 14 days of the later linked transaction occurring.
General Guidance
– Ensure you maintain accurate records and documentation for all transactions, as this will aid in the submission of forms and payment of taxes.
– It’s important to calculate tax accurately by considering both the original and any subsequent linked transactions.
– You can find additional information or more specific guidance on the HMRC website or through professional tax advice if needed.
Examples to Illustrate
Here are some practical examples that illustrate how to handle linked transactions correctly:
– Example 1: Original Transaction with No Tax Due
Imagine you bought a property for £100,000, and due to stamp duty threshold rules, you do not owe any tax. Later, you decide to sell the property, and the sale price is £200,000. This triggers a need to revisit your original transaction. For this, you must file a new SDLT1 for the sale and also inform HMRC about the original transaction. Your letter would include the UTRN, the new selling price, and any tax due based on this uplift in value.
– Example 2: Original Transaction and Additional Tax Due
Consider you purchased a commercial property for £150,000 and paid the stamp duty on that purchase. Later, you decide to lease some of the space and make improvements, leading to an increased valuation. If your property now measures above £200,000 due to these improvements, it may necessitate a review of the original tax paid. You will need to submit a new SDLT1 for the lease, along with a letter detailing the original transaction to reconvene your tax position.
– Example 3: Original Not Notifiable
If you initially bought a property valued at £80,000 and did not report the transaction because it fell below the reporting threshold, but then you receive an inheritance that significantly increases the value of your property or prompts a sale, you would now have to notify HMRC of the original purchase. This means you would fill out a new SDLT1 for the inheritance, submit a letter explaining the change in circumstance, and declare any tax that would be due based on the current value of the property.
By adhering to these guidelines and understanding how linked transactions affect your reporting responsibilities, you can avoid potential issues with tax compliance.
Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: Guidance on SDLT Procedures for Later Linked Property Transactions
