HMRC SDLT: Guidance on Completing SDLT Forms for Business Sale Transactions
Principles and Concepts of SDLT Forms Guidance
This section of the HMRC internal manual provides detailed guidance on completing forms SDLT1, SDLT3, and SDLT4, focusing on question 1 of SDLT4. It addresses transactions involving the sale of a business, outlining what the sale includes.
- Guidance on completing SDLT forms SDLT1, SDLT3, and SDLT4.
- Focus on question 1 of SDLT4 regarding business sale transactions.
- Clarification on what the sale of a business includes.
- Part of HMRC’s internal manual for accurate form processing.
Read the original guidance here:
HMRC SDLT: Guidance on Completing SDLT Forms for Business Sale Transactions
SDLT Guidance for Completing Forms SDLT1, SDLT3, and SDLT4: Focus on Non-Chargeable Assets
What are Non-Chargeable Assets?
When completing question 1 on form SDLT4 (referred to as 4.1 online), this section should be filled out if your transaction involves the sale of a business or part of a business. This includes cases where an interest in land—like property—is being transferred along with other assets that do not incur Stamp Duty Land Tax (SDLT).
Identifying Non-Chargeable Assets
You need to identify these non-chargeable assets by ticking the appropriate categories. Below are the types of non-chargeable assets you might include:
- Stock
For example, if you are involved in a manufacturing business, your stock could include:
– Raw materials
– Items that are still being worked on (work in progress)
– Completed products (finished items)
- Goodwill
Goodwill is the value associated with the reputation and customer relationships of the business. For guidance on this, refer to SDLTM04005.
If a payment for goodwill is part of the property transaction, it counts as chargeable consideration for SDLT. You must include the amount paid for goodwill in the total figure shown at question 10 on the SDLT1 form (referred to as 1.10 online) if you have entered codes A, F, or O at question 2 (1.2 online).
- Chattels and Moveables
Refer to SDLTM04010 for more information on this category.
‘Fixtures and fittings’ can include items that, in legal terms, are part of the land (known as ‘fixtures’). Any payment related to these fixtures must also be included in the chargeable consideration for SDLT purposes. You should incorporate this figure in your answer at question 10 on the SDLT1 form (1.10 online) if you’ve placed code A, F, or O at question 2 (1.2 online).
- Other Assets
This category includes anything in the transaction that is neither an interest in land nor falls under the previous three categories. It may include various items or agreements not specifically mentioned.
Example of Identifying Non-Chargeable Assets
Consider a fictional example to clarify how to identify these assets:
Let’s say you are selling a bakery business. The sale involves the building where the bakery operates (which is chargeable land) along with the following items:
– Stock of baked goods and ingredients (this would be marked as stock).
– The business’s reputation and established customer base (this would be classified as goodwill).
– Baking equipment like ovens and mixers that are part of the property (these are chattels or moveables).
– Customer contracts or loyalty schemes not tied to the property itself would fall under ‘Other.’
In this case, you would identify all the relevant assets by marking the appropriate categories in SDLT4.
Total Consideration for Non-Chargeable Assets
Once you have completed the first section of question 1, it’s mandatory to also fill out the second part. This part requires you to indicate the total value assigned to the non-chargeable assets you’ve listed.
– The allocation of value must be done fairly and reasonably. For guidance on this, refer to SDLTM04000.
If the non-chargeable assets were given with no payment at all, do not enter ‘0’. Instead, simply leave the second part of the question blank.
Understanding Chargeable Consideration
Chargeable consideration is essentially the total value that the buyer agrees to pay for the property and any non-chargeable assets. This figure is critical because it is used to calculate the amount of Stamp Duty Land Tax that needs to be paid.
– When you sell a business, make sure to identify what is included in the consideration.
– Ensure that any payments for goodwill or chattels (like fixtures and fittings) that form part of the transaction are included as part of the chargeable consideration.
Review Process for SDLT4
When submitting SDLT4, it is important to ensure that everything is filled out accurately. Here are some tips for a smooth review process:
– Double-check that you have marked all applicable categories for non-chargeable assets.
– Verify that the total consideration ascribed to these assets is calculated on a reasonable basis.
– If you are unsure about any classifications, refer back to the guidance documents or consider seeking professional advice.
Example Breakdown of Charges
Let’s elaborate on our earlier example of the bakery business sale to illustrate how to document and classify assets properly:
1. Stock: The bakery has:
– Raw ingredients worth £5,000
– Finished goods worth £2,000
– Work in progress valued at £1,000
– Total stock = £8,000 (tick this box)
2. Goodwill: You value the customer relationships and reputation of the bakery at £10,000. This amount should be included in the SDLT1 form (question 10, 1.10 online).
3. Chattels/Moveables: Baking equipment is worth £7,000.
– You tick this box because this sum must also be included in the SDLT1 figure.
4. Other Assets: You might have a loyalty card scheme valued at £2,000; therefore, you must tick this category as well.
Totaling it all together, you will have a total consideration of:
– Stock: £8,000
– Goodwill: £10,000
– Chattels: £7,000
– Other: £2,000
– Total = £27,000.
When completing the second part of the form, you input £27,000 as the total amount apportioned to non-chargeable assets.
Final Note on Completing SDLT4
Being thorough and accurate when completing the SDLT forms is vital for compliance with HMRC regulations. Ensuring that all elements of the transaction are correctly identified helps to avoid potential issues. Should there be any uncertainties during the process, referring to the relevant guidance documents or consulting with a tax professional is always a sensible approach.
Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: Guidance on Completing SDLT Forms for Business Sale Transactions
