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Busy Practitioner by Mark McLaughlin ATII TEP

The new Stamp Duty Land Tax regime includes compliance requirements similar to the self-assessment system for individuals and companies. The new rules are outlined by Mark McLaughlin ATII ATT TEPStamp Duty Land Tax (SDLT) is introduced on 1 December 2003, replacing the Stamp Duty regime on UK land and buildings (see FA 2003, ss 42-124, Schs 3-19).

From a compliance perspective, the SDLT regime imposes a system of self-assessment in respect of ‘land transactions’ (s 43), as outlined below (All references are to FA 2003 unless indicated otherwise).

Filing Returns

The liability to SDLT rests with the purchaser, who must deliver a land transaction return (a form SDLT1) to the Inland Revenue within 30 days after the effective date of every defined ‘notifiable’ land transaction. The return must be signed by the purchaser, and include a self-assessment of tax chargeable (ss 76-77). The purchaser can amend a return within twelve months following the filing date (Sch 10, para 6).

Payment of Tax

Payment of SDLT should be submitted at the same time as the return to the Inland Revenue processing center in Netherton. However, any Inland Revenue stamp office will be able to forward returns and payments to Netherton on behalf of individuals (see Tax Bulletin, Issue 67).

Interest is payable on late payment of SDLT from 30 days after the ‘relevant date’, which in most cases will be the effective date of the land transaction.

Interest is receivable on repayments of tax and penalties, from the date that payment is lodged with the Revenue to the date when the repayment order is issued (s 89).

The Netherton office address is Inland Revenue Stamp Taxes, Comben House, Farriers Way, Netherton, Merseyside L30 4RN.

Penalties for Late / Incorrect Returns

Purchasers are liable to penalties for late returns as follows (Sch 10, para 3):

- A flat-rate penalty of £100 if the return is up to three months late; and

- £200 in every other case.

In addition, if the return is not delivered within twelve months after the filing date, the purchaser is liable to a penalty not exceeding the SDLT liability. If the purchaser fails to comply with a notice to deliver a return where the filing date has passed, the Inland Revenue can apply to the Commissioners for maximum penalties of up to £60 per day until the return is filed (Sch 10, paras 4, 5).

Tax geared penalties also apply to fraudulently or negligently incorrect returns, and to failures to correct innocent errors in returns without unreasonable delay (i.e. within nine months of filing the return) (see Sch 10, para 8). Penalties can also be imposed for offences including the fraudulent evasion of tax (s 95) and assisting in the preparation of an incorrect return (s 96).

Inland Revenue Enquiries

The ‘process now, check later’ system applies as for self-assessment. The Inland Revenue can correct obvious errors and/or open an enquiry into the return (or an amendment) within nine months (Sch 10, paras 7, 12). Most enquiries will be risk based selections, although some returns will be randomly selected (SDLT Manual, paragraph 80590). The purchaser can apply to the General or Special Commissioners for a closure notice during the course of an enquiry. Information powers are available to the Inland Revenue, allowing for the issue of notices to produce documents etc for the purposes of an enquiry within specified time periods of not less than 30 days (s 93 and Sch 13).

Discoveries and Determinations

The Inland Revenue can make discovery assessments (e.g. if a return is found to be incorrect after the enquiry time limit has expired) and determinations (e.g. if a return is not delivered by the filing date). Such assessments should normally be made within six years from the effective date of the transaction, or 21 years in cases of fraud or negligence.

Assessments can also be made to recover excessive repayments of tax (Sch 10, paras 25, 28-29).

Appeals

The taxpayer has the right of appeal to the Special or General Commissioners within 30 days on SDLT matters including amendments to self-assessments and discovery assessments (Sch 10, para 35) and appeals against penalties (Sch 14, para 5).

Record Keeping

Purchasers must keep adequate records to enable the delivery of a complete and correct return, and to preserve records of land transactions for at least six years from the effective date. The maximum penalty for failing to comply is £3,000 (Sch 10, para 11).

Further Information

Further information regarding SDLT is available in Tax Bulletin Issue 67, and also via the Inland Revenue website including a draft version of the Stamp Duty Land Tax Manual (http://www.inlandrevenue.gov.uk/manuals/sdltmanual/).