Stamp duty land tax (SDLT) practitioners’ news - issue 18

June 2007

Contents

Advice on:

Unscannable black and white (2D bar-coded) land transaction returns - change in approach

We have been returning 2D bar-coded returns that fail scanning (if the reason for failure is obvious) since October 2005. Where the reason is less clear - for example, where firms’ printers are set-up incorrectly, or their ink supply has corrupted the barcode - we have been manually keying the forms. In these circumstances, practitioners could be unaware of the problem and would not have had the opportunity to put things right.

Because the numbers of 2D barcode scanning failures has been growing (see PN17), we have been writing to customers since mid-March 2007, explaining that, from 1 June this year, we would start sending incomplete or incorrect 2D bar-coded returns back for re-submission.

We evaluated whether these letters resulted in fewer returns being manually processed and discovered that they remained high. So we have decided to continue to key-in these returns until we can produce improved guidance on how best to avoid the 2D barcode problems. But we will continue to write to practitioners whose returns we have keyed - giving the reasons why, whenever possible.

Once we know more about the reasons for scanning failures, we will set a new date from which to begin returning unscannable forms. And we will give practitioners sufficient notice to prepare for the change in process.

Of course, Online filing eliminates all these problems – it has built-in validation, coupled with on-screen help and guidance. And, once you have successfully submitted your return, you get fast online delivery of the SDLT 5 certificate, which can be printed off immediately and submitted to the appropriate Land Registry.

Submitting returns beyond the due date: ‘reasonable excuses’ for 2D barcoded returns

In Issue 12 we outlined the circumstances we would normally regard as a ‘reasonable excuse’ for submitting an SDLT1 Return beyond the deadline. On the rare occasions that we send a 2D bar-coded SDLT 1 back with no visible reason for failure and a penalty then applies, we have agreed that this would also constitute a ‘reasonable excuse’. (The only 2D bar-coded returns that now fail at the scanning stage are those where we cannot read the barcode at all - often this stems from problems with the firms’ printer.)

‘Effective date’ - how to avoid making errors on SDLT 1 (question 4) for lease transactions

Analysis of rejected SDLT1 Returns show that many with an error on question 4 (effective date of the transaction) relate to lease transactions. This is often because the following entries are incorrectly made:

  • A date before 1 December 2003. This suggests the start-date of an existing lease, rather than the effective date for the notifiable transaction has been entered.
  • The date shown is in the future; or
  • The question is left completely blank.

In all these cases we send the return back or processing is delayed.

You must ensure that the effective date (question 4) is completed on every notification. If not, we will reject the form and return it to you.

If the return is not re-presented before the filing date (30 days after the effective date) it will attract a penalty. The effective date is when the transaction has effect - usually the date of completion of the transaction, whether this is:

  • a straightforward conveyance or transfer purchase (code F)
  • for the assignment of an existing lease, and for any acquisition of an interest which involves a lease e.g. purchase of a freehold reversion; surrender of a leasehold interest (code A),
  • the grant of a new lease (code L); or
  • any other notifiable transaction (code O).

But if a contract is ‘substantially performed’ before completion, the date the ‘substantial performance’ takes place is the effective date. Substantial performance takes place on the occurrence of the earliest of the following:

  • The purchaser takes possession of the whole or substantially the whole of the property.
  • Any rent is paid.
  • The whole or substantially the whole of any consideration other then rent is paid. ‘Substantially the whole’ means at least 90%.

The start date for the grant of a new lease ‘Code L’ should be entered at question 17 on the SDLT1 Return. Also, if the transaction is for an existing lease (Assignment/Assignation) then the start date for the original lease should be entered at question 17. This accepts dates from 1 January 1500, as well as future dates.

Advice on:

  • retaining copies of SDLT1 Returns; and
  • purchasers not signing blank Returns.

We would advise practitioners and/or their clients to retain copies of SDLT1 Returns, in case any queries arise following submission.

You should also advise purchasers not to sign blank SDLT1 Returns before the details of the transaction are shown. This is because they are ultimately responsible for ‘full and complete’ information being provided and must be satisfied that all the details entered are correct.

If you use online filing, the client’s signature is not needed. But you must have evidence on file that the client has agreed the Return.

SDLT CD-ROM to be discontinued

Since online filing was introduced, demand for our CD-ROM has significantly reduced and we will not be producing any more once current stocks have been exhausted. However, since online filing has so many advantages over the CD-ROM, including fast electronic delivery of SDLT 5 certificates and built-in validation (no more SDLT8s!) we hope our CD-ROM customers will be delighted with this alternative.

Revised SDLT60 (used to notify land registries that no SDLT 1 is required)/Where to send an SDLT60

Since 17 April 2007, only the current version of form SDLT 60 (PDF 38K) (or equivalents published by third party vendors) can be accepted. If an earlier version of the form is submitted, the Land Registries will reject it.

The SDLT 60 is a statutory form. There was a 12-month transitional period during which old stocks could continue to be used. This has now ended. Please scrap any earlier versions you may have in stock. Current versions are available from the HMRC Orderline:

HMRC CC
PO Box 37
St Austell
Cornwall
PL25 5YN

Tel: 0845 302 1472

Fax: 01726 201015 email

Guidance Notes on SDLT60 (PDF 33K) usage are available.

We would also like to remind practitioners that the SDLT60 should always be sent to the Land Registry office serving the area where the land is situated. Please visit the Land Registry website for a list of the administrative areas in England and Wales with their respective Land Registry offices.

SDLT cheque payments - remember the UTRN

We still receive many cheques without a Unique Transaction Reference Number (UTRN.) Although we have reminded practitioners about this before, these messages bear repeating:

  • Make sure every payment is accompanied with the correct UTRN in the format: 23456789MA.
  • If you use Stamp Taxes Online, your online receipt includes both a UTRN and a ‘successful submission receipt number’ (with 32 characters.) It is the UTRN only that must be quoted with any payments of stamp duty land tax.
  • If you submit paper returns, failure to include the UTRN will delay the issue of the certificate
  • If we have no UTRNs on cheques we are unable to match payments to corresponding returns. This causes processing delays, which can result in interest charges. This applies whether you submit online or on paper.
  • Remember to write the UTRN after ‘HM Revenue and Customs only’ on the front of the cheque.

If you are sending one cheque for multiple UTRNs, please:

  • list all the UTRNs and their corresponding monetary amounts on the back of the cheque; and .
  • make sure that the entries correctly add up to the total amount shown on the front of the cheque.

Electronic payments

If you file your land transaction returns online, we recommend you also pay electronically. Electronic payments are generally more efficient and secure than payment by post.

If, exceptionally, you are unable to pay electronically and must pay by cheque, please use one of the following options:

  1. If you are using a third party product (Case Management software) and have entered a UTRN from a book of SDLT payslips with pre-assigned UTRNs, send the payment (and payslip) directly to:

HMRC Accounts Office
Shipley
Bradford
BD98 8AA

If you are sending schedules and/or maps to the SDLT Processing Centre in Netherton, you may opt, if you wish to include your cheque and payslip in the same envelope.

  1. If you are using the free HMRC ‘Online Tax Return – Land Transaction’ product or a third party product which generates the UTRN from the application itself, payment (without a payslip) should be made as follows:
  • Make your cheque payable to 'HM Revenue & Customs only'.
  • Write the UTRN (which begins with a 5) after 'HM Revenue & Customs only'.
  • If there is more than one UTRN, write them all on the back of the cheque, with the corresponding amount for each one.
  • do not use a payslip with another UTRN crossed out.

Send the cheque to:

HMRC Stamp Taxes
Comben House
Farriers Way
Netherton
Merseyside
L30 4RN, or

Use the DX service to deliver the cheque and return to:

HMRC SDLT
Rapid Data Capture
DX: 725593
Bootle 9

Stamp Taxes Online - the paper trail is over

Key features

  • Stamp Taxes Online provides you with a secure method of viewing your data and sending a land transaction return over the Internet. The service is easy to use and, in the majority of cases, will calculate the tax liability for you.
  • No need to wait for a paper SDLT5 to arrive through the post. An online SDLT5 certificate (submission receipt) is received very shortly after the return is submitted. When printed, this is accepted by the Land Registry for registration purposes.
  • No SDLT8s are issued. In-built validation ensures that the Return has all the relevant data when it is sent to us.
  • The receipt verifies that the Land Transaction Return has been filed, removing any fear of a penalty being levied due to late submission (but don’t forget to pay the tax before the due date.)
  • A client signature is not needed – you simply have to have evidence on file that the client has agreed the return.
  • No separate SDLT2s, 3s or 4s. You only see the questions you need to answer. Many Case Management software products have a facility to automatically populate the SDLT Return.
  • The service operates 24-hours a day is much faster than the equivalent paper-based procedures.
  • More grants/assignments of lease transactions can be filed online

Stamp Taxes Online really is simple to use and the benefits are tangible. Find out more about Stamp Taxes Online products and how to register for the service.

Online Filing: lease start date (question 17 SDLT 1 & question 19 SDLT 4)

From April 2007 the ‘lease start date’ fields on SDLT Returns will accept dates from 1 January 1500 and also allow future dates to be entered. This will allow for the online notification of grants/assignments of lease transactions such as:

  • Reversionary leases where the ‘lease start date’ is later than the date it was granted (the ‘effective date’ of the transaction).
  • Assignments of very old leases – prior to 1 January 1900 (allowing dates from 1 January 1500).
  • In any case where the ‘lease start date’ is later than:
    • the effective date
    • a future date; or
    • prior to 1 January 1900 (from 1 January 1500 onwards)
  • Where ‘substantial performance’ has taken place and the ‘lease start date’ is later than the ‘effective date’.

Online Filing: future changes - effective date warning message

Many penalties are issued as a result of incorrect dates being entered on returns at question 4 (especially in a new year.) Because of this, we plan to include a warning message at the submission stage, only visible to those who give an effective date that exceeds the 30 day filing deadline.

The system will:

  • ask them to confirm the date is correct, and if incorrect
  • give them the opportunity to amend the date.

Automated Registration to Title of Land (ARTL) - for Scotland only

To allow for rigorous ‘fit for purpose’ testing, Registers of Scotland have put back the introduction of their ARTL system (See Practitioners’ News 15) to Autumn 2007.

Latest SDLT improvement initiatives

Ringing the changes for SDLT 8s

Following the success of the recent SDLT 8 Pilot we will be gradually introducing this telephone-based procedure into our everyday work over the next few months. We have already made a start and many customers who would previously have received SDLT 8 letters are getting their SDLT 5 certificates much faster.

We will also be using the calls to help practitioners get things right for future transactions – which we hope will benefit everyone involved: HMRC, practitioners and taxpayers alike. Whilst talking to customers, we will also publicise online filing, which if used, would mean never having to complete an SDLT 8 again!

Outreach Team

We have always visited individual practitioners to provide assistance with SDLT, particularly online filing. To reach a wider audience, and to take a more formal approach to this work, we have been piloting use of a permanent ‘Outreach Team’. It has visited a number of practitioners and practitioner groups recently – with extremely positive feedback.

Because the pilot has been so successful, the (currently small) team will remain in place and we are looking to redeploy additional experienced staff to increase its size. We are also hoping to focus more on presentations and workshops for larger groups of practitioners, to make best use of the resources we have available.

The Outreach Team has so far provided mainly practical advice on a wide range of topics, including:

  • Online filing.
  • SDLT8 issues.
  • Supplementary forms.
  • Notifications.
  • Penalties.
  • Interest.
  • Using Commercial Case Management Software Developer products.

Any technical queries the team can’t answer are taken away for onsideration by specialist colleagues.

Legal firms have begun approaching us to arrange outreach visits - often on the recommendation of other practitioners who have been impressed with the service.

If you would like help from the Outreach team, please contact Rachel Varndell to arrange a visit:

Stamp Taxes Helpline

Since 1 June 2007, we have doubled the number of telephone advisers on our Helpline.

Other improvements include a change in telephone architecture, to provide us with better management information to help us to target our resources more efficiently. It will also make more staff available to get involved in proactive SDLT8 work (See Ringing the changes for SDLT 8s)

We will use the Stamp Taxes area of this website to update you on progress.

SDLT on the web

Have you thought about using the Stamp Taxes area of the website before you ring the Stamp Taxes Helpline? It could save you time and money, as it holds all the information you need to produce returns that are accepted first time - leading to faster processing. The site includes:

  • Stamp Taxes Online
  • Tax Calculators
    These tools calculate the net present value of leases and assignments. There is also scope to identify whether or not the property is in a disadvantaged area and, if so, how this would affect the tax calculation.
  • Legislation and its application
    Information relating to Stamp Taxes legislation and its practical application, including the online SDLT Manual.
  • Completing Returns

A number of useful links to help you complete SDLT forms. These include:

  • Frequently Asked Questions
  • downloadable versions of guidance notes
  • notes on how to complete the SDLT form in particular cases Shared

Ownership Leases and Assignments of existing leases, for example:

  • Guidance on completing the modified SDLT 4; and
  • Circumstances in which an SDLT 60 is applicable.
  • Tips on how to avoid getting SDLT 8s (if you file online, you won’t need these).

We are continuing to review and improve the content, structure and navigation of the Stamp Taxes area of the website. You’ll see we have recently revised the SDLT Manual Lease Duty Chapter (England & Wales). A PDF version of the revised chapter is now available: an HTML version will follow in a few months time.

Stamp Taxes reorganisation

Latest work movements

Manchester Complex Transactions Unit - work moving to Birmingham

As part of Stamp Taxes’ ongoing reorganisation, work previously carried out by the Complex Transactions Unit in Manchester will gradually move to Birmingham over the next couple of months. We are now asking customers to make all postal contact with us through Birmingham Stamp Office This will include correspondence on complex transactions (work previously carried out in Manchester).

Belfast Stamp Office – work moving to Birmingham

As our resources in Birmingham Stamp Office increase, we would ask practitioners in Northern Ireland to send correspondence there, rather than to Belfast. This will ensure a faster, more efficient service.

Of course, practitioners should already be sending SDLT Returns to the SDLT Processing Centre at:

HM Revenue & Customs
SDLT
Netherton
Merseyside
L30 4RN

Sending correspondence to Birmingham Stamp Office

Birmingham Stamp Office is now dealing with very large quantities of post and will increasingly take on Complex Transactions Unit correspondence from Manchester.

To ensure your post is dealt with quickly and efficiently, it would be extremely helpful if you could mark envelopes with the tax (SDLT, SDRT or Stamp Duty) and topic you are writing about, quoting the appropriate reference number. Examples of SDLT categories could include:

  • Financial enquiries.
  • Multiple property transactions, where a schedule is included.
  • Completion following substantial performance.
  • Ending of Disadvantaged Areas Relief – Transitional Provisions.
  • Returns under Section 80, 81 and 81A.
  • Finance Act 2003 Returns under Schedule 17A.
  • Finance Act 2003 Returns relating to cases of contingent or uncertain consideration where tax has been deferred under FA03/S90
  • Request for information and advice – Code of Practice 10

Please do not send any correspondence to the SDLT Processing Centre, which merely processes returns as this will cause a delay in the correspondence being dealt with.

General feedback

In previous issues of the Practitioners’ News we included a customer feedback section. Disappointingly we have received very little feedback from readers on the matters raised and would like your views on whether this section should be retained.

Please pass on your comments to Mark Appleby

Previous issues of the SDLT Practitioners’ News

Issues of Practitioners' News are current at the time of publication but may become outdated or incorrect with the passage of time. Such material should not be relied on as a permanent source of guidance.

We do not retain hard copies of previous issues, but they are all available by visiting the newsletter index page.