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Taxation by Matthew Hutton MA, CTA (fellow), AIIT, TEP and Sharon Anstey LLB (Hons), CTA (Associate), IAC Matthew Hutton MA, CTA (fellow),AIIT, TEP and Sharon Anstey LLB (Hons), CTA (Associate), IAC offer a guide to the stamp duty land tax compliance documentation and point to some practical problems with the forms. Part 2 of this article covers the remainder of SDLT 1, looks at the three supplementary forms and suggests some preliminary information to be sought from the purchaser at (if not before) exchange of contracts. This two part article was published in Taxation on 5th and 12th February 2004 and is reproduced with kind acknowledgement to LexisNexis Butterworths Tolley.About the purchaser (including transferee and lessee)Boxes 49 to 64 of the stamp duty land tax return request details of the purchaser(s). Is there more than one (49)? If so, boxes 65 to 69 must be completed. If the lead purchaser is an individual, his National Insurance number is required (50). (There is no room on either form SDLT 1 or form SDLT 2 to give the National Insurance number of any but the lead purchaser where there is more than one purchaser: it is understood that space for this will provided in a future revision.) To ensure that an adviser has this information, it should be referred to in a client questionnaire. There must then be given the title of an individual (51), surname or company name (52), first name(s) of an individual (53) and address (54). Is the purchaser acting as a trustee (55)? A daytime telephone number is given at box 56: why is this needed, if an agent is involved? Are the purchaser and vendor connected (57)? This has particular relevance to the rule under section 53 imposing market value where a company purchaser is connected with the vendor. To which address is the certificate to be sent (58)? By completing box 59 an agent can be authorised to handle correspondence on behalf of the purchaser. If so, the agent’s name (60), address (61), DX number (61), reference (63) and telephone number (64) are then requested, though (surprisingly?) no e-mail address. Additional purchaserThere is space for one additional purchaser’s details, i.e. title of an individual (65), surname or company name (66), first name(s) of an individual (67) and address (68). Is the purchaser acting as a trustee (69)? If there is more than one additional purchaser, supplementary sheet ‘land transaction return – additional vendor/purchaser details’ SDLT 2 must be completed. Additional supplementary sheetsThere are three supplementary sheets to the land taxation return form SDLT 1: - land transaction return – additional vendor/purchaser details SDLT 2; - land transaction return – additional details about the land SDLT 3; and - land transaction return – additional details about the transaction, including leases SDLT 4. DeclarationBox 71 must be signed by either one or two purchaser(s), having read the notes in section 1 of the guidance notes, which warn that the provision of false information may lead to financial penalties and prosecution. Page 5 of the guidance notes indicates that all the purchasers should sign, but box 71 suggests that only two of them should sign. Where there are more than two purchasers, each purchaser will sign form SDLT 2: it is unclear whether this is all the purchasers or just the additional ones. The writers recommend that all the purchasers should sign box 71 on form SDLT 1. The completed form must be sent to Inland Revenue, Stamp Taxes/SDLT, Comben House, Farriers Way, Netherton, Merseyside, Great Britain, L69 1BY. The holder of a power of attorney (but not an agent) can sign a land transaction return. Start early!Given the tight compliance timetable, it would be sensible for the purchaser’s solicitor to be collating answers to the 71 Boxes on SDLT 1 well before completion (or earlier substantial performance), as well as to those on any of the supplemental forms that may be required, so that the form(s) can be signed along with the transfer documents, with a view to timely submission to Netherton. Additional vendor/purchaser detailsForm SDLT 2 has to be completed for each additional vendor or purchaser (beyond the first one, whose details are given on form SDLT 1). The reference to be inserted is taken from the payslip on page 7 of form SDLT 1. Box 1 asks if the form is for a vendor (requiring completion just of boxes 2 to 5) or a purchaser (all of boxes 2 to 8). The declaration at box 8 need not be signed by a vendor. Details required of both vendor and purchaser are: the title of an individual (2), surname or company name (3), first name(s) of an individual (4) and address (5). The additional purchaser details are, first, questions whether the purchaser and vendor are connected (6) and whether the purchaser is acting as a trustee (7). Box 8 has the declaration to be signed by the purchaser(s), having read the notes in section 1 of the guidance notes, and warns that the provision of false information may lead to financial penalties and prosecution. Additional land detailsForm SDLT 3 is to be used where all the details cannot be fitted onto form SDLT 1. The supplementary sheet has one or two extra questions. The reference given is taken from the payslip on page 7 of form SDLT 1. The type of property, using a code from the guidance notes, is given (1). There must then be given the address or situation of the land (2), the local authority number (3), the title number (4) and the National Land and Property Gazetteer (in Northern Ireland, Pointer) unique property reference number (5). If the transaction is for agricultural or development land, the unit of measurement (hectares or square metres) must be given, together with the area (6), and whether any minerals or mineral rights are reserved (7). Any plan attached is noted at box 8: the form reference number must be written or displayed on the map. The estate or interest transferred, using the codes in the guidance notes, is given at box 9. Additional details about the transaction, including leasesThe guidance notes confirm at section 5 whether supplementary sheet SDLT 4 should be completed, for example where the transaction forms part of the sale of a business or, for leases, in all but the most straightforward cases. If so, the reference given is taken from the payslip on page 7 of form SDLT 1. About the transaction (1) to (8)If the transaction forms part of the sale of a business, does the sale include: ‘stock, others, goodwill or fixtures and fittings’? What is the total amount of the sale consideration apportioned to the land (1)? If the property is for commercial use, what is it: ‘office, shop, factory, other industrial unit, hotel, warehouse, other’ (2)? Has a post-transaction ruling been obtained in accordance with Code of Practice 10 and has it been followed (3)? Is any part of the consideration contingent or dependent on uncertain future events (4)? Has the purchaser agreed a deferred payment basis with the Revenue (5)? The existence of any minerals or mineral rights is stated according to a code from the guidance notes (6). If the purchaser is VAT registered, what is the VAT number (7)? If the purchaser is a company, what is its tax reference number, company registered number and, if registered abroad, place of registration (8)? About leases (9) to (19)Are there any terms surrendered (9)? This is ambiguous, as ‘term’ can mean either duration or clause. The guidance notes say that the box is intended for use when a lease is surrendered, but then says ‘Please give the terms of any such lease’: what does this mean? If there is a break clause, what is its type: landlord only, tenant only or mutual (10)? What is the date of the break clause (11)? But many leases contain more than one break clause, of varying types: how are all of them to be shown on the form? Does the lease contain any of: option to renew, market rent, turnover rent, unascertainable rent or contingent reserved rent (12)? The instructions on the form require an X in a box or to be left blank. But the guidance notes require the word ‘yes’ (and sometimes ‘no’). Which takes priority? What is the rent review frequency (13) and what is the date of first review (14)? Box 13 is misleading and would be better headed ‘number of reviews during the term’: some leases have irregular review patterns. What is the type of rent review clause: open market, retail prices index or other (15)? What is the amount of ‘service charge/rent’ (16)? The annual service charge reserved in most leases is based upon a proposition of actual costs, requiring the tenant to pay, say, quarterly sums on account of the annual charge. It is not clear which figure should be given in the form: the quarterly on account figure for the first years, an estimate of the first year’s annual charge or some other amount? What is the frequency of any service charge: monthly, quarterly, annually or other (17)? Finally, is there any other consideration [wrongly stated to be ‘considerations’], e.g., services or building works: first, moving from the tenant to the landlord (18) or second, from the landlord to the tenant (19)? In either case, the relevant codes from the guidance notes are to be entered. Presumably, these boxes require completion only where there is chargeable consideration which must be brought into account for tax. The guidance notes suggest that these boxes relate only to premiums. Therefore, the fact that the landlord covenants to provide services for a service charge is irrelevant. The Revenue has said that it will take on board the above points, among others, in a revised version of SDLT 4. Guidance notes SDLT 6The guidance notes provide a very full explanation of how to complete the four return forms and, in themselves, provide quite a useful commentary on the basic workings of stamp duty land tax. A glossary of terms is given at the end. Official guidanceMatters of compliance under stamp duty land tax are addressed in issue 4 of the Stamp Duty Information Bulletin dated 24 September 2003. Every notifiable transaction (which includes transactions where the rate is 0 per cent) will require submission of a land transaction return within 30 days after the effective date of the transaction. The bulletin deals with, for example: - submission of plans; - completing and signing the land taxation return; and - ten frequently asked questions. ‘Light touch’The Revenue has said that in the early days of stamp duty land tax, it will apply a light touch in matters of compliance (and will give at least four weeks notice of withdrawal of this concessionary approach). In particular, it will ‘look wherever possible to process and issue stamp duty land tax certificates even if the land transaction returns have been completed unsatisfactorily and contain some omissions or errors’ and ‘forego late filing penalties for land taxation returns that have been submitted more than 30 days but not more than 40 days after the effective date of the transaction’. Preliminary enquiries for the purchaserIt is already clear that form SDLT 1 (together with any supplementary forms) should as a matter of practice be signed by the purchaser(s) at the same time as signing the completion documentation. This will enable the solicitor or other agent to ensure that the form is submitted within 30 days after completion. In the case where the 30-day period is triggered by prior substantial performance, attention should be given to completing the form for signature earlier, in time to meet the deadline. To enable accurate completion of the form, preliminary enquiries raised on behalf of the purchaser should include the following matters at least (and there may well be more): -Confirmation of the unique property reference number (box 31).Information sufficient to answer Boxes 34 to 48 about the vendor, his agent and any additional vendors. - Where the transaction involves participation in a limited partnership (to hold investment properties), the issue of joint and several liability for past failures in stamp duty land tax compliance by the partnership. - Whether the transaction is or could be one of a number of linked transactions (as defined in section 108). - For the purposes of the residential/non-residential distinction, both in relation to disadvantaged areas relief and generally, enquiries as to the past history of the property to ensure that its present status is correctly identified. - In relation to the exemption for part exchange with housebuilders, enquiries to confirm that both the old and the new properties are covered by the main residence exemption from capital gains tax, with the issue to be covered by both a warranty and an indemnity. Should the vendor be required to make a statutory declaration? - The same point may apply in relation to employee relocation relief and the relief for chain-breaking companies. - In relation to assignments of leases, the first assignment of a lease previously exempted as a leaseback following a sale of non-residential property is treated as the grant of a lease by the assignor (paragraph 11 of Schedule 17A): the history of the grant of the lease needs to be ascertained. Equally, an adjustment to an initial return following a rent review within the first five years where this follows an assignment will have to be made by the assignee: to do this, he will need access to the original return and any subsequent amended returns. Solicitors for the assignee should want a full set of copy returns and correspondence. Indeed, it may be sensible for all documentation relating to stamp duty land tax to be retained with the deeds to the property and not merely on the file. ConclusionSerious thought must be given within all professional offices (largely, though not necessarily exclusively, solicitors) where responsibility is accepted for stamp duty land tax compliance. Completion of form SDLT 1 in the simplest case is unlikely to take less than 30 minutes and may take considerably more. This exercise is going to add a significant time, and therefore cost implication, to every conveyancing transaction. Matthew Hutton MA, CTA (Fellow), AIIT, TEP and Sharon Anstey LLB (Hons), CTA (Associate), IAC are the authors of the Book Stamp Duty Land Tax available (in both electronic and printed form) by subscription on www.mckieandco.com or from This e-mail address is being protected from spambots. You need JavaScript enabled to view it
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About The Author  Mark McLaughlin is TaxationWeb's Co-Founder, Director and Technical Editor. He is a Fellow of the Chartered Institute of Taxation and a member of the Association of Taxation Technicians and the Society of Trust and Estate Practitioners. He lectures on tax subjects, is co-author of Tottel's IHT Annual and Ray & McLaughlin's IHT Planning, and Editor of Tottel's Tax Planning and Annual series. Mark's work has also been published in Taxation, Tax Adviser, Tolley's Practical Tax, Tax Journal and Simon's Weekly Tax Intelligence. Since January 1998, Mark has been a consultant in his own tax practice, Mark McLaughlin Associates, which provides tax consultancy and support services to professional firms. He publishes a regular 'Tax Update' e-Newsletter for clients and other professional firms. To receive future copies, contact Mark via his website. |
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Article Added Saturday, 20 March 2004 | 15847 Hits |
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