HMRC SDLT: Guidelines for Deferred Stamp Duty Payments on Works and Services Consideration
Deferring Payment for Contingent or Uncertain Consideration
This guide explains the special rules for deferring Stamp Duty Land Tax (SDLT) payments when the consideration involves carrying out works or providing services. These rules apply under FA03/SCH4/PARA10 and FA03/SCH4/PARA11, and they dictate how and when payments should be made based on the duration and completion of the works or services.
- If works or services are expected to take less than six months, SDLT must be paid within 30 days after completion.
- For longer projects, payment dates must be set at intervals of at least six months, with a final payment due 30 days after completion.
- Payments are calculated based on the value of works or services completed at each stage.
- Purchasers can request a change to the payment schedule if works are nearly complete but a six-monthly payment is due.
- Requests to alter the payment schedule must be submitted in writing to the Stamp Office.
- From 1 March 2019, if a transaction becomes notifiable, the return and tax payment are due within 14 days after completion.
“`
Read the original guidance here:
HMRC SDLT: Guidelines for Deferred Stamp Duty Payments on Works and Services Consideration
Stamp Duty Land Tax: Deferring Payment for Works or Services
When a payment for works or services is agreed upon but is to be paid later, there are special rules under UK law that guide how this should be handled, specifically under FA03/S90. These rules are important for ensuring that both the buyer and seller understand when and how taxes should be paid.
Understanding Deferred Payments
Deferred payments come into play when the payment for works or services is not made all at once but rather is spread out over time. This is typically covered under two specific parts of the legislation:
- Carrying out of works: Covered under FA03/SCH4/PARA10
- Provision of services: Covered under FA03/SCH4/PARA11
It’s essential to know these specifics as they dictate how and when to pay Stamp Duty Land Tax (SDLT), which is a tax charged on land transactions in the UK.
Payment Deadlines
Whether the works or services take a short or long time to complete affects when the SDLT payment is due. Here’s how this works:
If Works or Services Take Less Than Six Months
For projects expected to be finished within six months:
- The buyer must pay the SDLT within 30 days after the completion of the works or services.
If Works or Services Take Longer Than Six Months
If the expected duration is longer than six months:
- The payment schedule must include specific dates, with intervals of at least six months between payments.
- The final payment is due 30 days after the completion of the works or services.
Each payment will reflect the value of the work or services that has been completed up to that point in time.
Requesting Variations to Payment Schedule
As the works approach completion, there may be a need to adjust the payment schedule. For example:
- If a payment is scheduled for a specific date (say, 1 January 2013), but the buyer knows that the work will be completed a few days later (like on 6 January 2013),
- The buyer can apply to HM Revenue & Customs (HMRC) to combine these payments into one. They would request to make a single payment 30 days after the works are fully completed, which would consider all remaining payments.
This application must be written and sent to the Stamp Office, including the full address reference related to the transaction.
Notification and Payment Timeline Changes
Starting from 1 March 2019, if a transaction becomes one that requires notification for the first time, there are new strict timelines to follow:
- The buyer must submit a return and pay the tax due within 14 days after the works or services are completed.
This change means that buyers must be more vigilant about timelines, especially if their transaction is now deemed notifiable.
Examples of Application of This Guidance
To further illustrate how these rules work in practice, here are some hypothetical scenarios.
Example 1: Short-Term Works
Imagine a buyer hires a contractor to renovate a kitchen. The estimated time to complete the renovation is three months. In this case:
- The buyer must pay the SDLT within 30 days after the renovation is finished.
Example 2: Long-Term Project with Scheduled Payments
Now consider a buyer who contracts a builder for a new home, which is expected to take one year to complete. The payment structure includes:
- Payment of £60,000 is due every six months.
- The buyer continues making payments every six months, but the final payment is only made after 30 days from the project’s completion.
Example 3: Requesting to Change the Payment Schedule
If our previous example’s buyer realises that the home will be finished on 15 March 2023, but was set to make a £60,000 payment on 1 March 2023, they can:
- Contact HMRC to request that the payments be combined into one single payment due 30 days after 15 March 2023.
This could simplify the payment process significantly and reduce confusion over multiple payments.
Final Thoughts on SDLT and Works or Services Payments
Understanding the rules around deferred payments for works or services is crucial for anyone involved in property transactions in the UK. The distinct timelines and procedures help ensure that proper payments are made promptly while allowing flexibility when projects do not follow the anticipated schedule.
Complying with the rules can save both time and potential financial penalties, making it essential to fully grasp these concepts. Proper planning and timely communication with HMRC are key elements in managing SDLT obligations effectively.
Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: Guidelines for Deferred Stamp Duty Payments on Works and Services Consideration
