Legislation governing payment of SDLT
We have recently received queries concerning the statutory authority to send payment of any SDLT due in respect of a transaction.
The legislation (s. 76(3)(b) FA 2003) does not allow 30 days for payment following the ‘effective date’ of the transaction but says that the return must be ‘accompanied’ by payment of the total amount of tax due. In other words the legislation requires payment to be made at the same time as the return is delivered, whether that is 1 day or 29 days after the effective date.
This is obviously not practicable where the return has been delivered using the Stamp Taxes Online service, so it makes sense to allow an interval for payment after the return has been successfully filed online. This stands at 12 days, which we consider to be an appropriate interval. Payment should be received by us within 30 days of the 'effective date' or 12 days of filing the return online, whichever is earlier. Interest only runs from the end of 30 days.
The issue of the SDLT5 certificate is dependant on the receipt of a correct and full return and as long as all of the information is entered on the return then a certificate can be issued before we receive the monies due.
Inevitably there will be delays when payment is sent by cheque and we recommend that if you are submitting your SDLT tax returns online then you should also pay electronically. Electronic payments are generally more efficient and secure than payment by post. Practitioners can pay electronically by BACS Direct Credit, Internet or Telephone banking, CHAPS or by Debit Card over the Internet.
Users of the Stamp Taxes Online Service or a third party product which generates the UTRN from the application itself, under which circumstances an SDLT payslip is not required, should always ensure that whichever payment method they choose, the Unique Transaction Reference Number (UTRN) is included on the electronic feed for the bank or written on the back of the cheque if sending payment by post.
When an SDLT1 needs to be submitted where an agreement or contract previously notified because of ‘’substantial performance’’ needs to be notified again on "completion"
An article on this subject was included within Issue 1 (PDF ).
A substantially performed agreement for lease (SPAL) is treated as a lease.
The grant of a lease is then for SDLT purposes another lease, which is linked
for threshold purposes (but not for the purposes of paragraph 5 of Schedule
17A). So for SDLT purposes we have two leases, each of which needs an SDLT1
and SDLT4 (unless the actual lease can be self-certified). The actual lease
benefits from a relief (paragraph 9 overlap relief) which reduces the rent,
and it is the reduced figure that is used in the NPV calculation for the actual
lease. Note that paragraph 9 relief works by reducing the rent on the new
(or in this case actual) lease, not by giving credit for SDLT previously paid.
The only complication is if the threshold linkage gives rise to further tax
on the SPAL, in which case a further return must be made to the Birmingham
Stamp Office, in the form of a covering letter until forms are produced
for further returns.
Within the 3rd paragraph of the article in issue 1, the phrase 'completely
separate’ should read 'separate (but almost certainly linked)'.
Lease transactions for seven years or more with no chargeable consideration
A lease for seven years or more can be self-certified provided there is no premium and no rent of any monetary value (section 77(2A) FA 2003 as substituted by section 164(1) FA 2006). A peppercorn rent is of no monetary value. In practice we accept that rent of less than £1 p.a. is of no monetary value as the SDLT forms do not take account of pence.
In some circumstances there is no chargeable consideration on the grant of a lease even though the lease provides for rent. An example of this type of transaction is where there has been the grant of a lease in respect of which the entire rent has been fully taxed on substantial performance of an agreement for lease, perhaps from entry into occupation under licence. Overlap "relief" actually works by reducing the chargeable rent on the actual lease, normally to nil. Supposing that there is no premium, the actual lease appears not to be notifiable even though it reserves rent and may be for seven years plus.
If this is the case the lease can be self-certified but we would expect practitioners to explain the circumstances to the appropriate Land Registry in a covering letter.
Changes to backdating on renewal leases
We would like to remind practitioners that as outlined in Issue 3, there was a change in Finance Act 2006 (paragraph 9A of Schedule 17A) as a result of which in some circumstances, the term of a renewal lease can actually start earlier than the effective date for SDLT purposes:
Currently the SDLT Lease calculator calculates the term of the lease as being from the effective date until the end of the term. We realise that in respect of renewals of SDLT leases, if the term of the renewal lease is backdated, the term for SDLT purposes will be deemed to begin on the term commencement date. Therefore, calculations using the calculator would be wrong. In addition, if users simply stated the effective date as being the backdated term commencement date, the calculator may give a penalty warning.
In the limited circumstances in which paragraph 9A applies, the earlier start date should be entered as the effective date. If the calculator gives a penalty warning, this can be ignored. We intend to add further guidance to the 'Help Screen' for the Lease Calculator' shortly.
When submitting returns for lease transactions via our online service, you must enter your self assessed Net Present Value (NPV) calculation.
You must enter the NPV as calculated on our Lease Calculator by ‘Entering the ‘lease commencement date’ as the ‘effective date of the transaction’, to obtain the correct NPV & tax due figure.’ (This treatment only applies to Lease Renewal transactions granted on 19th July 2006 where the old lease was subject to SDLT when originally granted.)
You must enter your correctly self assessed ‘NPV’ figure at ‘field 1.23’ within the online return. It is from this information, that the online application will base its ‘tax due’ calculation and not from the correct ‘effective date’ and ‘lease start date’, entered on your return. Our online application will offer the correct ‘tax due’ figure, based on your correctly self assessed NPV (& premium).
Previous issues of the Technical Newsletter
Information in earlier Technical Newsletters was 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.
