Stamp Duty Land Tax

Stamp Duty Land Tax is a self-assessed tax. The onus is on the taxpayer to make the necessary land transaction return, calculate the tax and pay it. This is a fundamental change to how the procedure used to work. The old Stamp Duty Land Tax regime taxed documents, so it was possible to delay paying the duty in many cases simply by not executing the document. Transactions that did not bear stamps were not enforceable in the Court and so this meant that Stamp Duty Land Tax was often not paid until the document had to be relied upon. Once of the prime reasons for the introduction of Stamp Duty Land Tax was to prevent the use of these ‘resting on contract’ arrangements, which are no longer possible.

Under self-assessment, failure to pay the Stamp Duty Land Tax chargeable is subject to a tough regime of penalties. Self-assessment has been the Tax Revenues close friend since it was first introduced 7 years ago. It turns the taxpayer into a tax inspector and tax calculator and ultimately makes the taxpayer responsible for any error in the calculation and payment.

It is primarily the purchaser of the asset (usually land) concerned who is responsible for paying the Stamp Duty Land Tax. The transaction must be reported and the Stamp Duty Land Tax paid within 30 days, within interest and penalties applying for the transgressions of the deadline. The Inland Revenue operated a ‘soft touch’ approach in the early months of the Stamp Duty Land Tax, even to the extent of attempting to fix incomplete or incorrect returns, but this has now ceased.

Stamp Duty Land Tax applies to transactions involving any estate, interest or right of land, which includes transactions involving covenants and variations of leases. There are exemptions for acquisitions of property in specified disadvantaged areas.

There are some interesting technicalities in Stamp Duty Land Tax. The definition of a ‘chargeable interest’ excludes licenses but not leases, which makes the definition between the two even more important than it has been in the past.

Options involving land are also caught by the Stamp Duty Land Tax rules, which also impact on some transactions between companies and ‘related persons’. There are a number of complexities in the transitional arrangement which can trap the unwary

The current rates of Stamp Duty Land Tax for different types of transactions can be seen on the HM Revenue and Customs website.

If you require any legal advice relating to Stamp Duty Land Tax or other property matters, please contact us today on 01536 276300 or email