SDLT Case Notes


Posted by John Shallcross, 26th October 2019
John Shallcross specialises in stamp duty land tax.  As well as a number of guides on line, he is now putting on line case notes, intended as short pieces on quirky SDLT issues which arise from day to day.  These might be of interest to a variety of people, but are mainly aimed at other property lawyers.  An increasing part of John’s practice is acting on a consultancy basis to support conveyancers who advise on SDLT, but sometimes need specialist input.

Case notes

Who signs the return when a property is bought for a child? – 18 Nov 2019

We acted recently for grandparents buying a house for two grandchildren.  The house is to be rented out as a long term investment.  The grandchildren are aged under 18 and so the property was acquired in the names of the grandparents with a declaration of trust confirming that they hold on a bare trust for the grandchildren.

It is clear that the higher rates of SDLT apply (with the 3% surcharge being due).  That is because for surcharge purposes the purchase has to be judged as if made by the children’s parents.  The parents already own a property, so the higher rates were due.  The issues centred on the land transaction return.

Although the transfer of the house was into the names of the grandparents, it is clear that the “purchasers” are the grandchildren.  This is confirmed at SDLTM31710 and the grandchildren have to be named on the return as the purchasers and the tax liability is theirs.

The first challenge was to work out how to fill in Q49 – 51 of the return where normally the national insurance number of the lead purchaser would be inserted.  National insurance numbers are allocated within the three months before a child reaches the age of 16.  The children were younger than that and do not have NI numbers.

Guidance at SDLTM62520 says that where there is no national insurance number panels 49 and 50 should be left blank and panel 51 completed with an alternative number, such as a passport number.  A fall back is to call the Stamp Taxes helpline to be allocated a number.

The second challenge was to establish who should sign the return.  The older guidance on SDLT6 (now superseded) said a guardian (which I believe includes a parent) could sign.  The Manual at SDLTM31900 suggests that a parent or guardian is responsible for obligations of the minor.  Although that page says at the top that it was updated on 24 October 2018 that is not true of the content of the page. This misleading information is a long standing problem affecting many of the Manual pages which HMRC seem unable to fix.  In fact the provision at Finance Act 2003/s106(2) on which the guidance about parents and guardians relies was repealed by the Finance Act 2012 section 222!

The answer seems to lie in Finance Act 2003 / Schedule 16 / para 3 which says that in an acquisition by a bare trustee, the acts of the trustee are treated as acts of the beneficiary.  So the pragmatic answer is for the grandparents as the trustees taking the transfer of the property to sign the return.

What does the Manual say about that?  At SDLTM07300 it says “A nominee or bare trustee is not the purchaser and so cannot sign the declaration. In this circumstance, the actual purchaser must sign.”  The first part of this about the identity of the purchaser is correct.  The second part appears to go too far and in the case of a purchase by a minor the pragmatic solution is for the bare trustee to sign.  Where the legislation and the Manual are in conflict we should apply the legislation and discount the guidance.

More SDLT when owning a company which owns a property?  – 15 Nov 2019

I am sometimes asked by a buyer whether the 3% surcharge applies because the buyer has a company which owns one or more residential properties.  The answer is “no”.  In looking at Condition C (that there is another property which “counts against” the buyer) properties owned by a company are not relevant.  The point is not directly addressed in the present guidance in the Manual but was confirmed in the pdf Guidance Note which preceded the migration into the Manual in March 2018.  This was not carried forward because of limitations on the layout of the Manual (which frowns on a Q & A format).  Below for the record is the question and answer in Chapter 8 of the guidance of November 2016 which can now be found on the National Archives:

Q26.

I have shares in a limited company which owns a property for rental to tenants. I am purchasing another property which I will own direct. I do not own any other residential property. Will I have to pay the higher rates?

A26.

No, shareholdings in a company that owns residential property will not be counted when determining if an individual is purchasing an additional residential property, although the company may be liable to the higher rates if it purchases residential property. As this is your first purchase of a residential property the higher rates will not apply.

The guidance above preceded the introduction of first time buyers’ relief on 22 November 2017.  It is possible for someone who controls a company owning a property to buy their first home and qualify for first time buyers’ relief if they have never personally acquired a dwelling.  My more detailed paper between examples 3.3.5 and 3.3.6 explains this.  It refers to the guidance for the 2010 – 2012 incarnation of first time buyers’ relief which specifically confirms the point.  That guidance has been archived, but the old page SDLTM29850 can be found here. This confirmed that the relief could be claimed when the purchaser “is a director/shareholder or a company which owns an interest in residential property, provided that no direct interest has been held”.

Multiple dwellings relief: Round numbers – 11 Nov 2019

I was asked a few days ago why the saving for multiple dwellings relief (MDR) for a client worked out as such a pleasingly round number as £10,000.  She is buying a property with a self-contained annex and if multiple dwellings relief is available it will be on the basis of two dwellings. The MDR saving happens to work out as £10,000 for a property anywhere in the price range £500,000 to £925,000.

The way multiple dwellings relief works for two dwellings is that the transaction gains double the benefit of the lower bands of SDLT.  So an extra £125,000 of the price saves 5% SDLT (worth £6,250) and an extra £125,000 of the price saves 3% SDLT (worth £3,750).  These two savings add up to £10,000.  I have written a blog on multiple dwellings relief and the related issues for the higher rates (the 3% surcharge) for properties with granny flats and other subsidiary dwellings.  It links to a more detailed article with worked examples.

First time buyers’ relief: Mixed use property – 8 Nov 2019

I was reminded this week of an apparent discrepancy between HMRC guidance and the legislation on first time buyers’ relief.  It concerns a person who has previously acquired a mixed use property, such as a shop with a flat above it.

Take as an example Fiona who inherited a shop and flat and after owning the property for several years sold it and is now buying a home for under £500,000 to live in.  Here are some points:

  • The fact that she did not buy the shop and flat does not help with first time buyers’ relief.  It is any “acquisition” of a “major interest” in a dwelling which can cause the loss of the relief.
  • It is important that Fiona no longer owns the property when she buys her home.  Otherwise the higher rates of SDLT (with the 3% extra) would likely apply and that overrides first time buyers’ relief.
  • The issue considered here is whether the fact that Fiona had previously acquired a mixed use property, rather than a dwelling alone, rules her out of the relief.

HMRC’s Guidance Note on first time buyers’ relief at chapter 3 para 4 suggests that a previous acquisition of a mixed use property, including a self-contained dwelling, denies the relief.  But the legislation appears to say something different; that what was acquired had to be a dwelling alone before the relief is lost.

The issues are explored at section 3.3 of a detailed paper on first time buyers’ relief, especially example 3.3.5 involving Mike and Lin who had previously acquired a pub with managers’ accommodation above it.  The detailed paper can be accessed via this blog.

Ongoing problems with the 3% surcharge for additional properties and second homes – 4 Nov 2019

This blog looks at the latest statistics on tax receipts from SDLT. I take the opportunity to comment on the relative success of the introduction of first time buyers’ relief and on the problems with higher rates of SDLT for additional properties.

In particular I focus on the failure of the higher rates policy to discourage purchases by investors and the problems of misleading guidance on the rules around “replacement of main residence”.

I still have a stream of enquiries from people who are buying a first home to live in and who find it hard to believe that the fact that they have another property (often one they have never lived in) means that the extra 3% SDLT is due.

Despite promises to do so, HMRC have failed to amend the application form for a refund where the later sale of an old home means that an earlier purchase of a new home is no longer liable to the extra 3%. The form still does not say that for a refund to be due the old home must have been lived in as the person’s only or main residence at some point in the three years leading up to the purchase of the new home.

Buying a holiday cottage with planning conditions – 28 Oct 2019

There has been a change in the HMRC guidance on the meaning of “residential property” relating to the relevance of planning conditions limiting property to holiday use.  The consequences can be significant.  A property bought for £600,000 would attract SDLT of:

  • £38,000 if it counts as an additional residential property so that the “higher rates” of residential SDLT (with the extra 3% SDLT) apply
  • £19,500 if it counts as non-residential property.

The 3% surcharge only applies to the purchase of “dwellings”.  A key part of the definition is that a building or part of a building is a “dwelling” if it is “used or is suitable for use” as a dwelling.  It is the nature of a “dwelling” that it is (or could be) a person’s “residence”, involving a degree of permanence of occupation.  Broadly speaking, a “residence” involves a property being a person’s home.  A property being occupied on a short term basis, such as for a holiday, is not being used “as a dwelling” (though its physical configuration may well mean that it is suitable for use as a dwelling and so is within the statutory definition which is on an “either/or” basis).

A holiday cottage would often have a kitchen, bathroom and all the services and facilities one would expect for a dwelling.  The services (such as heating, electricity and water) might well be sufficiently capable of independent operation and isolation for it to count as a dwelling.  An issue with a holiday cottage can be whether legally it cannot be used as a dwelling because of planning restrictions.  Another issue is the weight to be given to the planning restrictions when weighing up whether a property counts as a “dwelling” for SDLT purposes.

Many properties bought for holiday use do not have planning conditions limiting their use to holiday purposes.  Even if used in a holiday lettings business or if rented out commercially, a property without such restrictions would likely remain “suitable for use” as a dwelling and so be within the definition of a “dwelling”. (The definition of a “dwelling” is that either it is used as a dwelling or alternatively it is suitable for use as a dwelling; either one will do.)  The purchase of a dwelling would be liable for the higher rates of SDLT if it counts as an additional property for the buyer or is bought by a company.

One sees a variety of conditions imposed in planning consents limiting the use of holiday properties in different ways.  For example a condition might be that the property “shall not be occupied as a permanent dwelling or by any persons for a continuous period exceeding 28 days in any calendar year”.  Sometimes that is coupled with a requirement to maintain a record of all the occupants of the units and to disclose those on request to the planning authority.  Or there could be a condition that the property will not be occupied during a specified month each year.

Other wording could be less restrictive.  For example consider a requirement that properties “shall be used to provide holiday accommodation only and they shall not be used as permanent unrestricted accommodation or as a primary place of residence”.  That might arguably allow the buyer to use the property as a second home, which they use for holidays.  Perhaps that could be use “as a residence”, though not as a main residence.

The longstanding guidance in the section of the HMRC Manual on the 3% surcharge at SDLTM09750 states that a holiday home which cannot be used all year round is still a dwelling for the purposes of the 3% surcharge.  That is thought to overstate HMRC’s position and is likely to be amended in due course.  HMRC’s views have been expressed recently in the guidance they added to the Manual on 1 October 2019, especially SDLTM00385, see key paragraphs from that below.  SDLTM00385 relates to the general FA03/s116 meaning of “dwelling” within the definition of “residential property” rather than the specific FA03/Sch4ZA definition of dwelling for the purposes of the 3% surcharge, but if a property counts as “non-residential” for the purposes of s116 it would be extraordinary if it counts as a “dwelling” for the purposes of the higher rates.

From SDLTM00385

Private/public legal conditions (including planning permission) affecting use are a factor in assessing suitability for use but although these may dissuade an occupier from using a building as a dwelling, they are not necessarily determinative of whether that building is suitable for use as a dwelling. This is particularly the case where there are restrictions in place which impact on use as a dwelling for part only of the year.

For example, a holiday chalet that is used for short stays would not be ‘used as’ a dwelling by the short term visitors. However, the chalet may still be ‘suitable for use’ as a dwelling. This is a question of fact in each case and depends on the wider context. So for instance, if restrictions of planning exist whereby chalet use is not permitted out of season or where only short stays are permitted then this would be a factor indicating that the chalet will also not be ‘suitable for use’ as a dwelling.

Planning restrictions are therefore a relevant factor in establishing whether a property is suitable for use a “dwelling” but are not determinative.  All factors would need to be weighed up.  Factors to look out for to support a return based on the property counting as non-residential would be:

  • Is there an established pattern of holiday lettings?
  • Is there active ongoing holiday use, such as bookings which are being taken on from the previous owner?
  • No-one is living in the property as their home at present?
  • How tight are the planning restrictions?  For instance do they prevent any one person occupying the property for more than say 28 nights in any one year?  Or perhaps they are less tight, for example just prohibiting occupation for the month of January each year.
  • Have the planning restrictions been complied with?
  • Are the planning restrictions enforceable still?
  • Would the planning authority be expected to enforce the planning restrictions if breached?
  • Would it be difficult to get the planning restrictions released?
  • Is the property subject to non-domestic rates rather than to council tax?

Aside:  It is only a “building” or part of a building which can count as a “dwelling”.  Someone buying a site with a caravan or mobile home is not buying a “dwelling”.  The issue of whether a mobile home is sufficiently “attached” to the ground as to become part of the property is discussed in the Manual at SDLTM09745.  Typically someone buying a site and a mobile home should apportion the price between the land itself (which is assessed for SDLT at non-residential rates) and the mobile home (which as a “chattel” is not liable to SDLT at all).

Elbowing out an existing lessee to create a larger corner unit – 23 Oct 2019

The following example illustrates some of the issues around overlap relief for SDLT and linked transactions.  Meet the following parties:

  • High Street Investor Ltd (HSI): who owns Unit 3 (which is vacant) and the adjoining Unit 4 (leased to Get Out of Here Ltd)
  • Get Out of Here Ltd (GOH): a retailer who took a 15 year lease 5 years ago of Unit 4 at an annual rent of £50,000 and who paid £4,258 in SDLT
  • Corner Sites Ltd: a retailer keen to take Units 3 and 4 and combine them into a single outlet.

A deal has been discussed where HSI is to receive £350,000 from Corner Sites.  Further, HSI is to pay £250,000 to GOH to induce them to surrender their lease of unit 4 (Corner Sites to pay HSI £250,000 to cover this cost in addition to the £350,000).  HSI would then grant a lease of Units 3 and 4 to Corner Sites on a 15 year lease at an annual rent of £120,000.

Two ways of structuring the deal are as follows:

Route 1

  1. HSI take a surrender from GOH of the lease of Unit 4 with GOH being paid £250,000 funded by Corner Sites.
  2. HSI grant a 15 year lease at a rent of £120,000 a year of Units 3 and 4 to Corner Sites, being paid a further £350,000 by Corner Sites.

SDLT analysis:

  • HSI acquire a chargeable interest from GOH (the lease taken by surrender) for £250,000 and so pay SDLT of £2,000.
  • Corner Sites have paid £600,000 for the grant of the new lease (the £250,000 is chargeable consideration for the new lease even if paid directly to GOH).  The SDLT on that premium is £19,500.
  • Corner Sites take a lease for 15 years at a rent of £120,000.  The net present value of the rent is £1,382,089 and the SDLT (no overlap relief available) is £12,320.
  • GOH are not able to recover any of the SDLT paid on their old lease which they have surrendered.
  • The acquisitions by HIS (by taking the surrender of the old lease) and by Corner Sites (by taking the new lease) are not “linked transactions” as HSI and Corner Sites are not “connected persons”.

This gives total SDLT of £33,820.

Route 2

  1. Corner Sites take an assignment from GOH of the existing lease of Unit 4, paying GOH £250,000.
  2. HSI in a surrender and regrant transaction with Corner Sites grant a 15 year lease at a rent of £120,000 a year of Units 3 and 4, being paid £350,000 by Corner Sites.

SDLT analysis:

  • Corner Sites acquire a chargeable interest (the lease taken by assignment) from GOH for £250,000 and so pay SDLT of £2,000.
  • Corner Sites pay HSI £350,000 for the grant of the new lease, the SDLT due on that premium is £7,000.
  • Corner Sites take a lease (as part of the surrender and regrant) for 15 years at a rent of £120,000.  Overlap relief applies, as credit is allowed for the first ten years in respect of the £50,000 per annum rent already taxed.  The net present value of the rent allowing for overlap relief is £966,259 and the SDLT on that is £8,252.
  • HSI do not have to pay any SDLT on the “surrender” leg of the surrender and regrant.
  • The acquisitions by Corner Sites from GOH and from HSI are not “linked transactions” as GOH and HSI are not “connected persons”.

This gives total SDLT of £17,252.

Conclusion

Proceeding by Route 2 offers a substantial saving in SDLT over Route 1 for three reasons:

  • It avoids the double taxation of the £250,000 funded by Corner Sites which on Route 1 is treated as consideration for the new lease as well as a payment to GOH to induce them to surrender the old lease to HSI.
  • It splits the £600,000 paid by Corner Sites into two capital payments to unconnected persons for different property interests.
  • It allows overlap relief to be applied; this is a relief where SDLT has been paid on the lease being surrendered; it is no objection that the old lease has been acquired by assignment.

Sports club incorporating into a company limited by guarantee – 21 Oct 2019

I have been looking at the SDLT issues for a sports club, with valuable property assets, which wishes to incorporate.  The club is presently an “unincorporated association” with trustees holding its property on behalf of the members in accordance with the clubs rules.  The club intends to incorporate as a company limited by guarantee; perhaps it will register as a Community Amateur Sports Club (CASC).  The new company will not be a charity and so there is no charities relief available, nor is group relief or any other special relief applicable.

Whether the amount of SDLT is prohibitive will depend on assessing the “chargeable consideration” for the acquisition of the property by the new company.  Perhaps there will be none, or it will be low enough to be affordable.  Elements to consider are:

  • Whether the company pays a price for the property (or promises to do so, with the amount being left outstanding as a debt).
  • Perhaps there is a mortgage which the company takes on from the club, in which case the amount of the debt assumed by the company is taken as “chargeable consideration” given by the company.
  • Normally when individuals transfer a property to a company with which they are connected, the market value of the property is taken as the chargeable consideration (Finance Act 2003 / section 53).  However there are some exceptions.  One is that the transferor is a “company” and that the transaction is part of a “distribution of the assets” of that company.  Whilst an unincorporated association is not a “company” for the purposes of group relief, it is a “company” for the purposes of this exception and so sometimes an exception from this market value rule can apply.
  • Perhaps there is a tenancy or lease to be granted by the company limited by guarantee as consideration for the transfer of the property to it.  If so the “exchange of land” rules could bring in the market value of the property as chargeable consideration.

The provisions are complicated and their application is dependent on the facts and the way the incorporation is carried through.

Announcement of a Budget on 6 November – 14 Oct 2019

Today (the day of the Queens Speech for the new session of Parliament) it has been announced that the 2019 Budget will be on Wednesday 6 November.  It remains to be seen whether the present Government is in office to deliver the Budget.  By convention the ‘Provisional Collection of Taxes’ motion is passed by the House immediately after the Budget speech so that changes can come into effect at 6pm on Budget day.  But we appear to be in an era where it cannot be taken for granted that conventions will be followed.

Legislation usually follows in the shape of a Finance Act as income tax and corporation tax are annual taxes and could not otherwise be levied the following financial year, though for an interim period they can be collected under the Provisional Collection of Taxes motion.  However the next financial year does not start until April 2020, so the timing of the Budget (now in the autumn before rather than the spring just before the new financial year) gives more leeway.

POST SCRIPT: On 25 October 2019 news came out that the Budget would not go ahead on 6 November, despite the Chancellor having said the day before that the Budget would go ahead despite the Brexit deadlock in Parliament.  The decision was confirmed in a letter from the Chancellor to the Treasury Select Committee available here.

Surrender and Regrant of Agricultural Tenancies – 14 Oct 2019

Tomorrow I am giving two presentations on SDLT at a residential and commercial conveyancing update 2019.  There is a particular focus on agricultural property, so I have updated my paper on the SDLT issues arising out of surrenders and regrants of agricultural tenancies.

These transactions are sometimes undertaken for estate planning reasons so as to improve inheritance tax relief (especially agricultural property relief from IHT) where a tenancy under the Agricultural Holdings Act 1986 has inherent value. The tenancy can sometimes be replaced with another AHA tenancy, or alternatively with a farm business tenancy.  The TRIG reforms made this easier in terms of the landlord and tenant issues.

The surrender and regrant is in principle an “exchange of land interests” with each of the:

  • landlord taking the surrender of the old AHA tenancy and
  • tenant taking the grant of a new AHA tenancy or an FBT

being liable to SDLT on the inherent value of the land interest acquired (as well as any payments made to the other party).

There is an exception to the SDLT market value “exchange rule” if the parties match, but there are traps to look out for, especially where is a change of tenant, where a partnership is involved or the property interests are for other reasons held on bare trust.

If one of the parties is a company “connected” to the other party then a different market value rule might apply under Finance Act 2003 section 53.

There could also be SDLT for the tenant to pay on the net present value (NPV) of the rent payable under the new FBT or AHA 1986 tenancy.  The NPV of the rent does not benefit from surrender and regrant “relief”.

The “growing lease” treatment can apply to a lease with security of tenure.  For example an FBT granted for a term of six years at a rent of £20,000 would not initially require notification as the NPV is below the threshold of £150,000.  However if the lease runs on then the lease is treated as being for a year longer on each anniversary.  So at the end of sixth year it is treated as a lease for seven years, at the end of the seventh year as a lease for eight years and so on.  The first land transaction return will be needed as a consequence of the eighth anniversary (when it is deemed to be a 9 year lease) which first takes the net present value over £150,000 and causes SDLT to be payable.

POST SCRIPT: A paper on the issues is now available here.

Modern Method of Auction – 11 Oct 2019

I have in the last week twice come across the use of this method of sale for residential property.  A fee (typically 3.5% of the price or a minimum of £6,000 inc. VAT) is paid by the “winner” of the auction who gets a “reservation agreement” and 56 days within which to negotiate a sale and purchase contract and to complete the transaction.

The fee is shared between the company running the auction and the estate agent who uploads the property details.  The price which is bid has to be paid in full (assuming a sale and purchase contract is later exchanged) without credit for the fee.

The information provided by the company running the auction says that SDLT may be due on the non-refundable fee as well as the price which is bid, even though it is only the price which is bid which goes into the contract and transfer.  My analysis of the terms of the “reservation agreements” and the auction terms and conditions I have seen is that a reservation agreement:

  • Is not a contract for the sale and purchase of land.
  • Is not an option to buy land nor a pre-emption agreement.
  • Is most akin to a lock-out / exclusivity agreement, though it has terms obliging the seller to use all reasonable endeavours to enter into a sale and purchase agreement.

There is a strong argument that the non-refundable and non-deductible fee is not paid for any kind of land interest and is not paid for the property, but is paid for the reservation agreement only.  The reservation agreement gives the buyer some important rights, in particular the seller is not allowed to deal with other parties and has to take steps to progress the sale process.

For SDLT purposes one would need to apportion the sums paid for the reservation agreement and for the property on a just and reasonable basis.  It seems defensible to apportion them in the way in which the parties have documented them, particularly as the figures are set in an open auction.  That would mean that SDLT is only due on the price as set out in the contract and the transfer and not on the reservation fee.

In the Taxation magazine of 3 October 2019 a Question and Answer suggests that this structure can make the whole transaction taxed at the lower “mixed rates” of SDLT!  I do not agree with this, residential rates of SDLT will apply where residential property is bought.

HMRC guidance on the meaning of “dwelling” for SDLT – 2 Oct 2019

HMRC yesterday published in the SDLT Manual on pages SDLTM00360SDLTM00430 more about “dwellings”; the new guidance pages can be accessed from this index page.  In particular they cover:

  • SDLTM00380: The interaction between the “used as a dwelling” test and “suitable for use as a dwelling” test.
  • SDLTM00385: The relevance of planning conditions is given more prominence than in the earlier guidance.  They give the example of a holiday chalet where only short stays are permitted.
  • SDLTM00385 also deals with a property that is no longer habitable as a dwelling.  These were the issues arising in the Bewley case.  They say that whether a property is derelict to the extent that it no longer comprises as dwelling is a question of fact and should only apply to a small minority of buildings.  It gives examples of things which could easily be addressed in the short term: switching on services and infestations of pests.
  • SDLTM00390 and SDLTM00395 deal with cases where a building is used partly as a dwelling and partly for other purposes (they give the example of a doctor’s surgery).  HMRC say that suitability for residential use can override an actual ongoing non-residential use.
  • SDLTM00400 deals with properties in the process of being constructed or adapted for use.  HMRC say that a property counts as a “dwelling” for SDLT as soon as building works on the foundations begins.
  • SDLTM00410 to SDLTM00430 state HMRC’s view on how to assess whether a property with an annex or outbuilding counts as one dwelling or as two dwellings.

Which property is a student’s “residence” when they are at university? – 30 Sep 2019

A blog on the Bank of Mum and Dad looks at the question of which property is a student’s main residence while they are at university: the house they share at university or the family home?  In the blog the question is examined in the context of whether a student buying a property to live in when at university would qualify for first time buyers’ relief for SDLT.  The relief requires the student to intend to live in the property acquired as their “only or main residence”.  The issue would also be relevant for capital gains tax on a sale of the property if a gain is realised on a disposal.

Since posting the blog I have found a little more about the issue of the “residence” of a university student.  The voter registration case of Ricketts v Registration Officer for the City of Cambridge in 1970 said that a Cambridge University student was “resident” in the city on the key date (10 October) for the purposes of voter registration and extracts from Lord Denning’s judgement in the case about what is a person’s main residence are quoted with approval in the HMRC capital gains tax manual at CG64455.

The Scottish Taxpayer Technical Guidance by HMRC (for the purposes of the Scottish rate of income tax) at STTG4400 has some examples of where taxpayers are “resident” for income tax purposes. The examples involving Solomon and Rebecca are for university students. Solomon returns to the family home in vacations and HMRC say his main place of residence is the family home. Rebecca stays at the house she shares with friends in the university town whilst working over the vacations; HMRC say her main residence is that shared house.

The fact that a property is being bought in the university town to live in itself suggests a greater degree of permanence and expectation of continuity than would normally be the case with university accommodation.

Stamp duty land tax helpline tip – 27 Sep 2019

The HMRC helpline for Stamp Duty Land Tax on 0300 200 3510 sometimes appears to be creaking under the strain of calls.  They report having received just under 50,000 calls in the four months up to July 2019.

Often after a long introductory message and being invited to select various options, the call is disconnected. HMRC say they are seeking to recruit more staff and are beginning to handle calls at Birmingham as well as in Glasgow and Cardiff.  One tip is to avoid calling at peak times; HMRC the say the peak times for calls are 9 – 11 am and 2 – 4 pm.

POST SCRIPT: The lines are open Monday to Friday: 8:30am to 5pm.

HMRC update the guidance on the 3% surcharge replacement exception – 26 Sep 2019

The guidance on the higher rates of SDLT for additional properties at SDLTM09800 has been updated by HMRC this week.  They have corrected an error about the circumstances in which a person can rely on a sale or other disposal by a spouse or civil partner of a property the person had lived in.  The previous version had suggested that the spouses / civil partners needed to be “living together” at the time in order to rely on the sale or disposal.  There are complications to the replacement exception which are discussed here and there is a full case study here of someone who HMRC initially thought should be charged the extra 3% on the basis that the property she had sold had not been her most recent home.

Completion return when actual completion follows a substantial performance – 24 Sep 2019

I was checking how to notify HMRC of completion when an online return SDLT1 has already been submitted because of substantial performance ahead of completion.  In the HMRC stamp duty land tax manual at SDLTM07800 it says that a paper completion SDLT1 should be sent to the Stamp Office at BT – Stamp Duty Land Tax, HM Revenue and Customs, BX9 1HD United Kingdom with a covering letter and a copy of the previous SDLT1 which notified substantial performance.

However SDLTM50250 says that a further return will be required where there have been changes between substantial performance and actual completion resulting in a different amount of tax now due. This page says this further return should be a letter to the Stamp Office and should contain the following details:

  • UTRN of original return
  • Details of the new calculation
  • If additional tax is due, an appropriate payment
  • If a refund is due, claim for the amount overpaid

I called the helpline who confirmed that a “further return” should be posted even if there is no change to the amount of tax due.  It should just be way of letter with a copy of the previous return and the UTRN.  There is no need for a new SDLT1.  If there have been no changes to report then the letter should say this and should give the actual completion date.

Returns for a single transaction comprising a freehold and a leasehold property – 21 Sep 2019

A house is being bought which has two registered titles: the house itself is a freehold title and the garage is registered under a leasehold title.  A single price had been agreed for the whole and there is to be a single contract and transfer.  However two land transaction returns will be needed to notify the single transaction!  That is because the HMRC software is not capable of combining freehold and leasehold interests on a single return.  So an apportionment of the price is needed (on the returns only, not on the contract and transfer) and two returns are needed, one for each interest.  At panel 13 each should state there is a “linked transaction” and state in panel 13 the combined price.  Each return will be for part of the price and give part of the overall SDLT is due.

This is a “work around” as in reality there is only one transaction, but staff on the HMRC SDLT helpline 0300 200 3510 confirm that they require two returns in this way.

These notes are intended for general information purposes only and do not constitute legal or professional advice. Advice should be sought before proceeding with any transaction.

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