HMRC SDLT: SDLTM50920 – Procedure: Deferring payment in case of contingent or uncertain consideration FA03/S90: Special rules for carrying out of works and provision of services
Deferring Payment for Contingent or Uncertain Consideration
This section of the HMRC internal manual outlines the procedure for deferring payment under FA03/S90, focusing on special rules for the carrying out of works and provision of services. The principles and concepts include:
- Guidelines for deferring payments when consideration is contingent or uncertain.
- Application of special rules under FA03/S90.
- Impact on tax liabilities and compliance requirements.
- Procedures for calculating deferred payments.
SDLTM50920 – Procedure for Deferring Payment when Consideration is Contingent or Uncertain
Introduction to Deferred Payments
Deferred payments apply to certain situations where payment for carrying out works or providing services is not required immediately. This is covered under specific rules as defined in FA03/S90, particularly through FA03/SCH4/PARA10 and FA03/SCH4/PARA11.
Understanding the Key Concepts
– Deferred Payment: This is when the payment for works or services can be delayed rather than paid upfront.
– Contingent Consideration: This refers to payments that depend on future events, such as the completion of certain works or the provision of services.
– Uncertain Consideration: Similar to contingent consideration, it involves payments that are not definite or that might change based on specific conditions.
Payment Timelines for Works or Services under Six Months
If the works or services are expected to take less than six months to complete, here’s how the payment schedule works:
– The applicant must pay the Stamp Duty Land Tax (SDLT) for the completed works or services.
– This payment should be made no longer than 30 days after the works or services are completed.
Payment Timelines for Works or Services Taking Longer than Six Months
In scenarios where the works or services will take longer than six months to finish, the following rules apply:
– The applicant must clearly outline the payment dates and establish intervals that are not less than six months apart.
– The final payment must be done no later than 30 days after the works or services have been completed.
Payment Based on Progress of Works or Services
Payments will be calculated based on the value of the works or services that are completed at each stage. This way, payment aligns with the progress made rather than a lump sum based on the agreed contract total.
Requesting Changes to the Payment Schedule
Towards the end of the works or services, the purchaser has the option to request a change to the payment schedule. This request is particularly useful when:
– The works are nearly finished, but a six-month payment is due around the same time.
Example of Changing the Payment Schedule
Consider a scenario where a payment is due on 1 January 2013. If the purchaser learns that the works will be completed by 6 January 2013, they can:
– Submit a request to HM Revenue & Customs (HMRC) to consolidate payments.
– This allows them to make a single payment that encompasses all remaining consideration, instead of making separate payments—one for the extended period up to 1 January and another for the brief period up to 6 January.
Making a Request to HMRC
To change the payment schedule, the purchaser must:
– Write to the Stamp Office.
– Reference the full address of the project when making the application.
New Regulations from March 1, 2019
Starting from 1 March 2019, if a transaction becomes notifiable—meaning HMRC needs to be informed for the first time— there are updated rules for compliance:
– The return, along with any Stamp Duty Land Tax due, must be provided within 14 days after the completion of the works or services.
The goal of these updates is to ensure accurate and timely reporting of payments, adhering to current regulations and practices.
Summary of Payment Procedures
To summarise the procedures for deferring payments for works or services:
– For works/services under six months: Pay SDLT within 30 days after completion.
– For works/services over six months: Set payment intervals of no less than six months, with the final payment due within 30 days post-completion.
– Payment based on progress: Payments should reflect the value of completed stages.
– Adjusting payment schedules: Requests can be made to consolidate payments if works near completion.
– Updated reporting timelines: Notifiable transactions must be reported within 14 days after completion.
Important References
For more detailed guidance and specific instructions on the procedures, you can refer to SDLTM documents like SDLTM04060 for a broader context and rules regarding Stamp Duty Land Tax related to carrying out works and providing services.
If you need further clarification, more information can be found on the HMRC website or related resources like the Stamp Duty Advice Bureau to ensure you are fully compliant with current tax regulations.
Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM50920 – Procedure: Deferring payment in case of contingent or uncertain consideration FA03/S90: Special rules for carrying out of works and provision of services
I am here to help. I offer free expert advice to help you understand your land tax obligations, rights, and entitlements.
