SDLT on linked transactions

by Readers Question

13:10 PM, 25th July 2017
About A year ago

SDLT on linked transactions

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SDLT on linked transactions

Hi all, we are in process of buying 2 semi-detached house (adjacent ones) from a buyer in a single deal of £1.5M (£750K x2).

Our Solicitors have advised us that this will be treated as a linked transaction for SDLT and band rate of SDLT will apply on total consideration of £1.5M.

We will appreciate if anyone can suggest if they have gone through with such kind of transactions.

Many thanks

Sunil



Comments

Neil Patterson

13:17 PM, 25th July 2017
About A year ago

Hi Sunil,
Is it a purchase of two separate Freehold titles or is it one purchase of one title?

SUNIL JAIN

13:18 PM, 25th July 2017
About A year ago

Reply to the comment left by "Neil Patterson" at "25/07/2017 - 13:17":

Thanks Neil, It will be purchase of 2 freehold titles.

Neil Patterson

13:20 PM, 25th July 2017
About A year ago

From .Gov >> https://www.gov.uk/guidance/sdlt-linked-purchases-or-transfers

"When 2 or more property transactions involve the same buyer and seller, they count as ‘linked’ for SDLT. HM Revenue and Customs (HMRC) may count people connected to a buyer or seller as being the same buyer or seller.

If 2 or more transactions are treated as linked then the buyer pays any SDLT due on the total value of all linked transactions. This may mean that they pay a higher rate of SDLT than if the transactions are counted individually.

If all the properties that link are residential, apply the residential property rates to the linked transactions.

SDLT transactions that count as linked

HMRC counts transactions as linked if:

there’s more than one transaction
the transactions are between the same buyer and seller or between people connected with either of them
the transactions are part of a single arrangement or scheme or part of a series of transactions

Connected persons

A connected person could be your relative, for example your brother, sister, parent, grandparent, husband, wife or civil partner - or one of their relatives.

If the buyer or seller is a business, a connected person would be a business partner and their relatives. It also includes companies and groups of companies who are connected to the business.
Different kinds of linked transactions

How and when you do a SDLT return depends on the type of linked transaction you have.
Transactions linked as part of a single arrangement

Some transactions are linked because they’re part of the same single arrangement or scheme. It’s the same whether you document them separately or not. If each transaction has a separate contract, and if the sales are part of the same deal, they count as linked for SDLT.

If you sell a residential property in such a way that one person buys the house but their relative buys the garden, the 2 transactions are linked. They’re connected people and they’re buying things from the same seller as part of a single deal.

Because the 2 transactions are linked, calculate the amount of tax due on the total chargeable consideration for all the transactions. Then, apportion this amount between the transactions in proportion to their share of the total chargeable consideration.
Transactions linked as part of a series of transactions

When a sale is followed by one or more related sales, if there’s something to link all the transactions together, they count as linked transactions for SDLT. There’s no limit to the length of time between the transactions.
Example

You are a property speculator buying a new house from a builder. Later, you buy a second and finally a third house. The builder offers a special price for the second and third houses. You pay £180,000 for each house once it’s complete.

The 3 transactions link as part of a series. Calculate the amount of tax due on the total chargeable consideration for all the transactions to date, at the rates in force at the time of that transaction. Then, apportion this amount to each transaction in proportion to its share of the total chargeable consideration. You may have to pay some more tax on the earlier transaction(s)."

SUNIL JAIN

13:28 PM, 25th July 2017
About A year ago

What SDLT will be payable on these transactions ?

Samantha Butcher

19:21 PM, 27th July 2017
About A year ago

Sunil,

You need to look at something called Multiple Dwellings Relief. This would charge the SDLT on the average price paid. This should effectively make the SDLT charge the same as 2 X £750K houses and not one £1.5m one.


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