purchasing 2 cottages - are they linked transations?

[cannon]

Hi

I am purchasing two cottages for the purposes of furnished holiday lets. The properties are not joined nor do they share any land, but are neighbourhing properties, being sold by the same vendor. The sale of one did not rely on the sale of the other, there is no 'deal'

Are they regarded as 'linked'. This is a £0000's question!
Any help welcomed

Heather

[King_Maker]

I believe HMRC would considered them "linked".

[cannon]

King_Maker

Thank you for your response.
Are you able to offer an explanation as to why HMRC would consider them as 'linked'. From checking the SDLT manual & website it suggests that just because they are bought and sold by the same buyers/seller does not necessarily mean they are linked.

Is there room to negotiate or is it a matter of 'fact'?

thank you
Heather

[King_Maker]

IIRC, the last time I looked, HMRC did consider all purchases from the same vendor as linked. Do you have the links (pun intended!) to where they have changed their minds.

I have never agreed with such an interpetation.

[cannon]

Hi

I too don't agree with their interpetation. I rang the SO help line and when I challenged the standard reponse "In the circumstances...99% of cases will be regarded as linked" due to the info. on their own web site, I was transferred to a more senior advisor who appeared to accept it was not a cut and dry case, but suggested I complete the SDLT as if they were not linked and should it be queried they'd ask to check the 'paper work'. It's still unclear about what a 'single' transaction is - but I think the extract below gives a clear indication the intention is to 'link' transactions where there has been a clear intention to reduce SDLT costs e.g. seperating the sale of house and its land (2nd Para)

regards
Heather

See extract below (5th Para)

SDLTM30100 - Application
Linked transactions FA03/S108
Linked transaction are those which form part of a single scheme, arrangement or series of transactions between the same vendor and purchaser or, in either case, persons connected with them. ICTA88/S839 defines when parties are connected.

If a vendor, for example, advertises a house with gardens for sale and the purchase is structured in such a way that the husband buys the house and his wife buys the gardens, these will be regarded as linked transactions.

The rate of tax will be determined by the sum of the chargeable considerations paid for both house and gardens.

It is a question of fact whether of not transactions are linked. A purchaser will need to make a full examination of all the circumstances leading to the transactions before completing their land transaction return.

Just because two transactions are between the same purchaser and seller does not necessarily mean they are linked. The transactions will be linked however if they are part of the same deal.

If two transactions are documented separately
The form in which the transactions are documented will not determine whether they are linked or not. For example, documenting transactions with separate contracts will not prevent them being linked if the transactions are under arrangements which indicate they are part of a single deal.

Series of transactions
Series of transactions means something more than that one transaction following the other. There must be something else to connect the transactions.

It would however be a question of fact whether purchases are totally unrelated. In particular the purchaser needs to consider whether the fact that the first transaction had happened had affected the terms of the second transaction.

Where successive transactions are linked, for example the grant of an option and its exercise, extra tax can be due for the first transaction.

Any extra tax is payable at the same time as tax is payable on the second transaction. See FA03/S81.

Linked transactions with the same effective date can be reported as a single notifiable transaction using a single land transaction return, this is at the discretion of the purchaser.

Where this is done, the transactions will be treated as a single transaction and all the purchasers, if more than one will be treated as joint purchasers. See SDLTM31600.

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Please find copied web page below:

[King_Maker]

Thank you for the extract from the SDLT Manual.

My copy of the Manual only has the first 2 paragraphs above, so maybe it has been updated recently. :(

" ....they are part of a single deal." This also is a bit ambiguous.

IMHO, if you can prove that each transaction was independently done at full MV (e.g. with professional Valuation reports), then even if purchased from the same vendor, they are not linked for SDLT purposes.

[cannon]

King-Maker

I welcome your HO and of course agree with your interpretation! I am paying full MV and have professional valuation reports, from a very reputable surveyor. The surveyor has been engaged by a high street bank who is providing my commercial mortgage - hopefully this lends further weight to our intrepretation.
Thanks again for your help.

Heather

[King_Maker]

The only suggestion I would add, if the SDLT at issue is significant (and your OP indicates it is), is to obtain Counsel's Opinion - perhaps after speaking to your bank on the subject (with a view to getting their legal experts' views)?

Does your own solicitor have any comments?

[cannon]

I feel my own solicitor has taken the line of least resistence, and accepted, without question the standard HMRC line. However, in light of the advice and Q&A's received, I've asked that the vendors solicitor provides a statement clearly identifying that the properties were not a single transaction (i.e. not tied) or a series of transactions (i.e. not dependent upon each other) and the offer price is full MV.
I had not considered asking my bank for their legal experts' view - I shall certainly do that too.

Thank you
Heather

[talbot45]

Could you please inform me of the outcome of this case as a may have a similar situation

Thanks

Andrew