Read the original guidance here:
HMRC SDLT: SDLTM62085 – Processing: Further guidance for completing forms SDLT1: Further guidance for question 13 SDLT1, linked transactions

SDLT – Guidance on Completing Forms SDLT1: Linked Transactions

This guidance explains how to complete forms SDLT1 when dealing with linked transactions. It covers the principles of connecting transactions, how to calculate the tax due, and provides practical examples to help clarify the process.

Understanding Linked Transactions

Linked transactions occur when two or more land transactions are connected or part of a single arrangement. It is essential to identify these links, as they affect how Stamp Duty Land Tax (SDLT) is calculated. The following relationships indicate that transactions are linked:

• If two parties are connected, such as a husband and wife.
• If a person is related to their brother, sister, parent, or child.
• If an individual controls a company, that company is connected to them. Additionally, if two different companies are controlled by the same person, those companies are also connected.

Calculating Tax for Linked Transactions

When transactions are linked, you must combine the total consideration for all transactions (excluding rent) before applying the appropriate rate of tax. This means you add together the amounts paid for each transaction to get a single total value.

For cases involving the code L, where part of the consideration includes rent, ensure you include the total amount aside from just the rent in your calculations.

Example of Linked Transactions

Let’s look at a practical example involving Jack and Jill:

Scenario: Jack buys a house for £240,000, and Jill, his wife, purchases the garden of that house for £20,000. Both transactions are with the same seller and form part of a single bargain.

Jack’s Return

• In Question 10 of Jack’s land transaction return, he will declare a purchase price of £240,000.
• For Question 13, he answers ‘yes’, indicating the transactions are linked.
• In Question 13, part 2, Jack will enter the aggregated consideration total of £260,000 (£240,000 + £20,000).
• Question 14 will state £7,200, which reflects the tax applied at 3% to the total consideration of £260,000.
• For Question 15, Jack will enter £7,300, which includes the £7,200 tax plus a £100 late filing penalty.

Jill’s Return

• In Question 10, Jill’s land transaction return shows a purchase price of £20,000.
• Like Jack, she will also tick ‘yes’ for Question 13, confirming the transactions are linked.
• In Question 13, part 2, Jill will also show the total of £260,000.
• For Question 14, Jill’s tax amount will be £600, calculated at 3% of the total consideration.
• In Question 15, Jill enters £700, which includes her £600 tax plus a £100 fixed late filing penalty.

Additional Details on Completing SDLT1

When filling out the SDLT1 form, be mindful of the following points:

• Ensure that all transactions which are connected are reported accurately. This is important as it affects the tax rate applied.
• Be aware of the deadlines for submitting your SDLT returns. If you miss the deadline, penalties will apply as demonstrated in the examples above.
• Understand that linked transactions can include not just direct purchases, but any arrangements that imply ownership or control between connected parties.

Common Questions Regarding Linked Transactions

What if the transactions were not disclosed?

Failing to disclose linked transactions can result in significant penalties. It is essential to provide all relevant information in your SDLT return to avoid these issues.

If a family member takes over a property at a reduced price, is that a linked transaction?

Yes, if the sale involves family members, special relationships may create a connection making the transactions linked. Always assess any deals between close relations.

How can I prove that transactions are linked?

You may need to provide documentation or evidence of the arrangement, such as written agreements or evidence of family relationships, during the tax calculation process to substantiate your claims.

Conclusion on Filling Out SDLT1

Understanding how to manage linked transactions is essential for accurately completing the SDLT1 form. Remember that the consideration amounts should be aggregated when submitting your SDLT returns to ensure compliance with HMRC regulations.

For further guidance on specific SDLT queries, including linked transactions, visit: SDLT Guidance – SDLTM62085.