The payment window for stamp duty land tax (SDLT) has been halved to 14 days affecting commercial and residential property transactions while a new penalty system will also come into force with immediate effect
Stamp duty land tax (SDLT) now has to be paid within 14 days of the sale, down from 30 days with effect 1 March 2019.
The current penalty regime for late filings and payments will remain in place and SDLT defaulting purchasers will have to pay an automatic fixed penalty for failure to return by the filing date. The amount of the penalty depends on the lateness of the return.
There is a fixed penalty of £100 for returns filed up to three months after the filing date, rising to £200 for returns later than three months.
In addition, in extreme cases where a filing is a year or more late, HMRC will also charge a tax-based penalty, which can amount to the full amount of the tax due on the return.
Now all purchasers need to ensure that their stamp duty is paid within two weeks of the sale transaction in a move which affects all land and property transactions in England. A completed SDLT return must be made within 14 days of the ‘effective date’ of the transaction, even if no tax is due when the property sales is under £125,000 currently.
The effective date is usually the date the transfer is completed, but it can be the date the contract is ‘substantially performed’ if this is before completion. ‘Substantial performance’ is when one of the following happens:
- most of the buying price is paid - normally 90% and payment can be in cash or something else of economic value;
- the buyer is entitled to possession of the property; and
- the first payment of rent is made.
Scottish and Welsh property purchasers have a devolved property tax regime through devolved tax. Sales in Scotland have been subject to Land and Buildings Transaction Tax since 1 April 2015, while Wales introduced Land Transaction Tax from 1 April 2018.
Although most people use a solicitor or legal conveyancer to act on their behalf, it is the individual purchaser’s responsibility to ensure payment is made.
There are a few exceptions to the requirement for a SDLT return, including transactions where no money or other payment changed hands; property inherited in a will; and property transferred because of divorce or civil partnership dissolution. Note also that HMRC has confirmed that when property is transferred to a connected company the deemed market value rule in section 53 of Finance Act 2003 applies.
DLT returns should be made via the electronic SDLT5 certificate which shows details of the first property address for any transaction. If there are multiple addresses, or more than one seller or buyer, access the ‘View, print and store’ section of HMRC’s online SDLT return and print a PDF version of forms: SDLT2; SDLT3; and SDLT4.
HMRC rejects returns that are filled electronically but printed and posted, or printed out and filled in by hand.
If the transaction has a large number of properties or multiple sellers or buyers, the online filing system can handle up to 99 entries (any combination of buyers, sellers or properties).
SDLT4 - complicated leases, commercial transactions and some residential situations
Use the SDLT4 form for complicated leases, commercial transactions and some residential situations, as well as form SDLT1, if any of the following apply:
- the land or property transaction is part of a business sale agreement;
- the buyer is a company;
- you’ve asked HMRC for advice on how the law applies to the transaction, using Clearances and Approvals 1 (CAP1), or another route;
- any part of the consideration is dependent or uncertain;
- arrangements have been made with HMRC under the deferment provisions; and
- there are mineral rights reserved.
It is possible to file on paper using a paper SDLT1 return where the transaction is straightforward, such as a simple residential conveyance, but a special form needs to be obtained from HMRC.
Report by Sara White