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What is Stamp Duty Land Tax?

Author

Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

Introduction – what is stamp duty land tax (SDLT)?

Stamp Duty Land Tax (“SDLT”) is payable by the purchaser where there is a chargeable land transaction.

It applies to transactions that take place in England & Northern Ireland.

Scotland has its own form of duty called Land & Buildings Transaction Tax (LBTT) and Wales has Land Transaction Tax (“LTT”). At present, both are almost identical to SDLT but apply to transactions in those jurisdictions.

Clearly, this includes the simple conveyance of land such as buying a residential property to live in. However, it will also include the creation or assignment of a lease.

Recent changes to SDLT

A decade ago, SDLT was a relatively simple tax. However, a considerable number of changes over the last few years, motivated by the desire to squeeze more tax out of property. Depending on the nature of the property, the type of purchaser and the chargeable consideration brought in to account, then progressively higher rates of duty apply.

There are also various reliefs and exemptions available subject to the circumstances and type of property.

Who pays Stamp Duty Land Tax?

SDLT, LBTT and LTT are all paid by the purchaser in the land transaction.

What is a land transaction?

SDLT is chargeable on land transactions. A land transaction means any acquisition of a chargeable interest in land.

As stated above, this will include a simple conveyance of land such as buying a house, creating a lease or assigning a lease.

Chargeable consideration & SDLT

SDLT (and its Scottish and Welsh counterparts) are only paid on chargeable consideration. Generally speaking, this means the price that has been paid by the purchaser to the vendor.

As such, where a property is gifted to a person then there generally will be no SDLT due. However, there are some exceptions to this. This is where there is so-called ‘deemed’ consideration.

Generally, this arises in two scenarios where there is no actual consideration:

  • Where the donee takes on the debts of the donor as part of the deal then the amount of the assumed liability is deemed to be chargeable consideration; and
  • Where a gift is made to a Company to which the donor is connected then a deemed market value rule will bite.

There are some other special rules that apply including where the consideration takes the form of an annuity…if that’s your thing.

Amount of Stamp Duty Land Tax payable

See our [dedicated article] on this subject.

Conclusion

SDLT, LBTT and LTT are payable by the purchaser on the acquisition of chargeable interests in land where there is chargeable consideration.

Chargeable consideration can be actual consideration or deemed consideration.

If you have any queries around what is stamp duty land tax, LBTT or LTT or any other property tax matters then please do get in touch.

 

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