Stamp Duty Land Tax (SDLT) replaces Stamp Duty tax on land transactions.

SDLT is a tax charged upon the transaction not upon the document recording the transaction.  The tax is chargeable upon for example sale of freehold or leasehold interests in land or on the grant of leases.

Liability for the tax is determined in the first instance by the taxpayer completing a self assessment tax return.  Where we are acting for you in a conveyancing transaction we will complete and file this on your behalf.  In routine cases the tax will fall due to be paid upon completion of the transaction.

The amount of SDLT payable is assessed in cases involving the purchase of an interest on land on a sliding scale.

Purchase price

• Up to £125,000                           0%
• Over £125,000 to £250,000        1%
• Over £250,000 to £500,000        3%
• Over £500,000 to £1,000,000     4%
• Over £1,000,000                         5%

The acquisition of a property cannot be registered at the Land Registry without production of the appropriate certificate confirming that SDLT has been paid.

However, if you are a ‘first time buyer’ and have never owned a property before in England or abroad there is currently an exemption and no Stamp Duty is payable below £250,000.  At present the exemption is limited to transactions completing prior to 25th March 2012.

SDLT is a tax which has historically attracted many attempts at avoidance.  The new Stamp Duty regime has been designed to obviate these.  For this reason the scheme is complex and this note can be no more than a very basic outline.

The Revenue have extensive enforcement mechanisms which include the ability to launch an “enquiry” and to reopen self assessments of liability for a period of up to (in theory) twenty one years.  Disputes as to the extent of liability are rare but can ultimately be resolved by the tax commissioners.  At the date of writing (February 2011) HMRC have recently announced an intention to review SDLT records to see if they can attempt to collect further SDLT in appropriate cases.  It is a requirement to retain records of law transactions for six years after each transaction.  Where instructed in a conveyancing transaction we will do this on your behalf.

If a number of “linked” transactions are progressing the value of these will be aggregated and tax payable at the rate applicable to the total sum.  By way of example, a client purchases one flat for £125,000 there will be no SDLT payable.  However if a client purchases 5 flats at £125,000 all from the same Vendor, SDLT will be due at 4% on £625,000, although following the 2011 Budget this is now under review.  

The assessment of tax liability becomes more complex in the grant or assignment of a lease at full market rent.  

The calculation of SDLT in these cases is outside the scope of this briefing note.