The time period in which to submit Stamp Duty Land Tax returns and pay the tax due on commercial and residential property transactions in England has been shortened to 14 days, under new rules that take effect today.
SDLT is a self-assessed tax and liability lies with the property buyer, as such, the change in deadline will be of particular importance to purchasers opting to pay their tax liability directly to HMRC.
Late submission of the return to HMRC will result in an automatic fixed penalty fine payable by the property buyer of £100 for up to 3 months past the deadline, increasing to £200 after 3 months. Interest will be payable on SDLT which remains unpaid within 14 days of the effective date of the transaction.
The new rule does not affect property transactions in Scotland or Wales. In Scotland, Scottish Land and Buildings Transaction Tax (LBTT) applies and for land in Wales, the Land Transaction Tax (LTT).
Stamp Duty Land Tax rules
Stamp Duty Land Tax (SDLT) applies in England on the purchase, lease or other qualifying transaction relating to commercial property over £150,000 or residential property over £125,000, unless the transaction is SDLT-exempt.
SDLT is payable on both the money and ‘money’s worth’ given directly or indirectly by the purchaser and is also payable on VAT.
‘Land transactions’ under SDLT are widely defined and can include the transfer of a freehold interest and the grant, assignment, variation or surrender of a lease and other less common transactions.
Transactions that come under the SDLT exemption are limited and subject to strict HMRC interpretation, such as a licence to use or occupy land and a tenancy at will.
SDLT liability is triggered on the ‘effective date’ of the land transaction. For freeholds, this is typically the day of completion but can be on an earlier day when the contract is ‘substantially performed’, for example, the majority of the cost is paid, the purchaser is entitled to possession of the property or the initial rent payment has been completed.
HMRC regards ‘taking possession’ to be when the tenant or purchaser obtains the keys and is entitled to occupy the property.
As of 1st March 2019, the SDLT liability must be paid in full within 14 days of the ‘effective date’ to avoid interest and penalties.
Transactions completed before 1st March 2019 will remain subject to the previous 30-day time limit.
A SDLT return has to be made for any freehold transaction with a value of more than £40,000. This applies even if the transaction is valued at under £125,000 and no tax is owed or if relief is being claimed.
A SDLT return is not required for transactions where no payment was made such as a divorce settlement; if the property was inherited; for freehold transactions with a chargeable consideration of less than £40,000; for leasehold transactions where the lease is less than seven years, as long as the chargeable consideration is less than the residential or non-residential SDLT threshold; or leasehold transactions where the lease is seven years or more, provided the premium is less than £40,000 and the annual rent is less than £1,000.