HMRC SDLT: Guide on Deferring SDLT Payment for Contingent or Uncertain Consideration

Deferring Stamp Duty Land Tax on Contingent Consideration

This guide explains how to defer Stamp Duty Land Tax (SDLT) payments when the consideration for a property transaction is contingent or uncertain. It includes examples illustrating how SDLT is calculated when payments depend on future events, such as obtaining planning permission for development.

  • Example 1: A purchaser pays £350,000 upfront and plans further payments based on planning permission for houses. SDLT is initially due on the upfront payment.
  • SDLT for the initial £350,000 is calculated at £7,000, with further tax due once planning permission is granted.
  • When planning permission for 200 houses is obtained, an additional £200,000 is paid, increasing the total SDLT to £17,000.
  • Example 2: Similar scenario, but the initial payment is £100,000, with no immediate SDLT due.
  • Planning permission for 300 houses results in a further payment of £300,000, leading to a total SDLT of £9,500.
  • In both cases, further SDLT returns must be filed with HMRC within 30 days of the relevant event.

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SDLTM50900A – Procedure for Deferring Payment in the Case of Contingent or Uncertain Consideration

This guide explains the process of deferring Stamp Duty Land Tax (SDLT) payments when the payment amount is uncertain due to dependent events. We will look at the rules established by the Finance Act 2003 and provide examples to clarify these principles.

Understanding Contingent or Uncertain Consideration

Contingent consideration means that the total amount you have to pay is not fully known at the time of purchase. This usually occurs in property transactions when future payments depend on getting planning permission or other similar events. In these situations, a buyer can apply to defer SDLT until the amount can be fully calculated.

Key Principles for Deferring SDLT Payment

  • Relevant Event: The event that triggers the need for a further payment, such as obtaining planning permission.
  • Initial Payment: Any upfront or initial payments made are subject to immediate SDLT calculations.
  • Further Payments: These will be calculated and reported after the relevant event has occurred.
  • 30-Day Reporting Requirement: Further SDLT payments based on the new total consideration must be reported to HMRC within 30 days of the relevant event.

Example 1: Initial and Later Payments

In this example, a buyer purchases land in January 2021 for a total of £350,000, made up of an immediate payment of £350,000 and future payments of £50,000 for each set of 50 houses once planning permission is granted. The buyer anticipates that planning permission for 200 houses will be approved.

The buyer applies to defer the SDLT payment because the total payment amount is uncertain. This application is approved since obtaining planning permission is considered the significant event relevant to SDLT regulations.

According to s90(5) of the Finance Act 2003, SDLT is still payable on the initial amount of £350,000. The tax calculation for this is as follows:

ChargeSDLT Due
0% on the first £150,000£0
2% on the next £100,000£2,000
5% on the remainder£5,000
Total SDLT Due£7,000

After a successful application, the buyer receives planning permission for all 200 houses and makes an additional payment of £200,000 to the vendor.

The next SDLT amount due is then calculated upon the total consideration:

Total consideration = £350,000 + £200,000 = £550,000

ChargeSDLT Due
0% on the first £150,000£0
2% on the next £100,000£2,000
5% on the remainder£15,000
Total SDLT Due£17,000

Subtracting what has already been paid, this means:

  • Total SDLT now due = £17,000
  • SDLT previously paid = £7,000
  • Further SDLT now due = £17,000 – £7,000 = £10,000

The buyer will need to submit a return to HMRC for this further SDLT within 30 days of getting the planning permission.

Example 2: Adjusted Initial Payment and Planning Permission

This example is similar to the first, but the initial payment made by the buyer is lower, at £100,000. They also plan to pay £50,000 for each of the 50 houses for which they receive planning permission and expect to be approved for 200 houses.

Just like in the first case, the buyer makes an application to defer the SDLT payment, which is accepted. Here, the relevant event remains the granting of planning permission.

At this stage, since the only payment made so far is £100,000, no SDLT is due at this early point. The rest of the tax payment is postponed until future payments are necessary.

Several months later, the buyer is granted planning permission to build 300 houses on the land and pays an additional £300,000 to the vendor. Now, the total amount to calculate SDLT is £400,000.

The SDLT calculation for this situation is as follows:

ChargeSDLT Due
0% on the first £150,000£0
2% on the next £100,000£2,000
5% on the remainder£7,500
Total SDLT Due£9,500

This buyer will also need to make a further return to HMRC and pay the SDLT within 30 days of receiving planning permission.

Additional Information for Buyers

  • Buyers should keep a record of all relevant events and any future payments made as these can affect SDLT calculations.
  • It’s important to submit all returns to HMRC on time to avoid any potential penalties or interest charges.
  • Consulting a tax specialist or legal advisor may provide further guidance on complex transactions involving contingent considerations.

By understanding these regulations and deferral procedures, buyers can make informed decisions and effectively manage their SDLT obligations.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: Guide on Deferring SDLT Payment for Contingent or Uncertain Consideration

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