Stamp Duty Land Tax
The following is a brief outline of relevant issues; it is not a comprehensive guide, for specific enquiries contact Property Taxation Specialists.
SDLT was introduced by the Finance Act 2003 and took effect from the 1st December 2003. Alterations and amendments to the tax have been made by every Finance Act since then and by a myriad of changes to regulations. It is a highly complex piece of legislation which is much misunderstood, both by practitioners and HMRC.
The following quotation from HMRC’s own web-site illustrates the problem;
“SDLT is generally payable on the purchase or transfer of property or land in the UK where the amount paid is above a certain threshold. In addition most UK land and property transactions must be notified to HMRC within a certain time limit – even if no tax is due.
Various rules apply for working out how much – if any – SDLT is payable. The calculation- which is based on a value called the’ chargeable consideration’ - can vary depending on whether the land is residential or non-residential, freehold or leasehold, or on other factors such as whether several transactions are linked.
There are also some transactions which are exempt from SDLT, or where reliefs can reduce the amount payable.
Broadly speaking, SDLT is charged on a percentage of the amount paid for property or land when it is bought or transferred – unless there is a relief or exemption.
Higher percentage SDLT rates apply to higher value transactions. The amount payable can also vary depending on whether the property is being used for residential or non-residential purposes and whether the property is sold as a freehold or leasehold”.
SDLT is a highly complex tax which is not necessarily a one off one, as under certain situations a rent review, or uncertain elements of the rent payable being crystallised can lead to the need to file a further return and pay more SDLT, and not only once.
There are significant difficulties to overcome in composite transactions where a business is sold as a going concern and the consideration needs to be apportioned between taxable and non-taxable elements. HMRC have a particular approach for certain categories of propertys and another approach for others. These apportionments can also impact on elements of goodwill and potential capital allowances claims together with the vendor’s CGT position, and the purchaser’s future tax affairs.
There are special rules for property owning partnerships, intercompany transactions and sale and lease-backs. Sharia or Islamic finance transactions also have their own special rules.
At PTS we have an in depth knowledge of SDLT, Chris Hart is the only Surveyor member of the Stamp Taxes Practitioners Group. He has written articles on the subject for Taxation Magazine, lectured widely and together with the late Tony Johnson was the author of the SDLT Handbook he also contributed to Valuation: Principles into Practice on the subject.
SDLT is a potential minefield where conveyancers and accountants benefit, as well as PTS other clients from practical assistance and from our technical and valuation expertise. Since the most recent anti-avoidance legislation it has become increasingly difficult to avoid SDLT, but it is possible to ensure that the minimum amount of tax is paid.
The services offered by PTS in respect of SDLT, in addition to those detailed in Property Taxation services are;
An audit of all a company’s leasehold interests subject to SDLT, to identify if further returns are required or additional tax due.
Tax mitigation by pre-planning the way in which a transaction is carried out. Ensuring that all due reliefs are obtained.
Structuring composite transactions to ensure that the correct tax is paid and the correct amounts are allocated to both chattels and goodwill.
Apportionments and valuations for SDLT taxation purposes.
Valuations for the purposes of partnership and inter-company transactions.