Stamp Duty Land Tax

General

Stamp Duty Land Tax is a tax on transactions involving certain rights in or over land in the United Kingdom. Section 79(1) of the Finance Act 2003, which created the SDLT regime, specifies that:

"A land transaction to which this section applies, or (as the case may be) a document effecting or evidencing a land transaction to which this section applies, shall not be registered, recorded or otherwise reflected in an entry made ....in any register maintained by the Keeper of the Registers of Scotland other than the Register of Community Interests in Land unless there is produced, together with the relevant application, a certificate as to compliance with the requirements of this part in relation to the transaction."

The statutory definition of land transaction (i.e. any acquisition of a chargeable interest) is such that SDLT is payable in respect of many types of registrable deeds.

In terms of section 21 of the Land Registration etc. (Scotland) Act 2012, the Keeper is to reject an application to the extent that the applicant does not satisfy the Keeper that the application does not fall to be rejected under a prohibition in an enactment, which includes the prohibition in section 79(1).

An SDLT 5 certificate or a Submission receipt and Electronic SDLT 5 confirms that Her Majesty's Revenue and Customs (HMRC) have been notified of a land transaction which may be liable to Stamp Duty Land Tax (SDLT). Certain registrable deeds being submitted to the Keeper for registration must be accompanied by evidence that the transaction has been notified to HMRC before registration can proceed. 

The Keeper will reject an application in respect of which:

• it is clear that it should be accompanied by an SDLT 5 certificate or Submission Receipt and Electronic SDLT5 but it is not; or
• it is accompanied by such a certificate, but it is clear that the certificate does not relate to the registrable deed for which registration is sought; or 
• where a paper SDLT 5 is submitted, it is clearly a photocopy.

What registrable deeds may require to be accompanied by evidence of notification? 

The key types of transaction which may fall to be notified to HMRC are:

• deeds which transfer the right of an owner in land, e.g. disposition, contract of excambion, general vesting declaration; 
• deeds by which the right of a tenant in a lease is acquired, e.g. grant of lease or assignation of a lease or variation of lease if this includes additional land;
• deeds renouncing or surrendering the right of a tenant in a lease, e.g. by renunciation;
• deeds constituting, varying, discharging or terminating particular types of right in relation to land, such as liferent, deed of servitude or deed of real burdens or a deed creating a pre-emption.

As a result, it is only necessary to consider whether appropriate evidence has been enclosed with an application of notification of the land transaction to HMRC in applications for registration of the foregoing transaction types. There are many registrable deed types reflecting transactions which do not fall within the definition of a land transaction, e.g. standard securities and deeds relating to heritable securities generally.

What registrable deeds do NOT fall within the SDLT regime?

There are also exempt land transactions, such as dispositions for no consideration (i.e. love, favour and affection), dispositions in implement of a separation or divorce, or in implement of a will.

When must a registrable deed be accompanied by evidence of notification?

• A disposition where the consideration is £40,000 or more;
• A contract of excambion where there is monetary consideration of £40,000 or more, or where no monetary consideration passes, the property for which the property in the application is exchanged is valued on the application form at £40,000 or more;
• An assignation of lease where the premium is £40,000 or more;
• A grant of lease where there the premium is £40,000 or more;
• A grant of lease where there is annual rent of £1000;
• A renunciation of lease where the consideration is £40,000 or more (but not where the premium flows from tenant to landlord)
• A deed relating to residential land, either creating a servitude right or a real burden (including a right of pre-emption) or a deed discharging, or varying such a right or burden where the consideration is £125,000 or more; and 
• A deed relating to non-residential or mixed use land, either creating a servitude right or a real burden (including a right of pre-emption) or a deed discharging, or varying such a right or burden where the consideration is £150,000 or more.

In the foregoing cases, if no evidence is submitted with the application, the application must be rejected. 

Content of SDLT 5 or submission receipt and electronic SDLT 5

Both types of certificate contain the following information:

• Name of the purchaser or granter of the registrable deed,
• Name of the seller or grantee of the registrable deed,
• Property address and/or Title number (if appropriate).

If the transaction affects more than one property, you should note that a Submission Receipt and Electronic SDLT 5 will specify only one property. This may be the application with which you are dealing and a copy of the certificate should be placed in each casebag to which it relates. In such a case, provided that the other details relate to the deed you are examining, you can proceed with the application on the assumption that the certificate does relate to that deed. This differs from the position with a paper SDLT 5 where each property affected by the transaction should be listed on a schedule to the SDLT 5. If the schedule is not attached to the SDLT, the application must be rejected.

Example of submission receipt and electronic SDLT 5

A transaction notifiable under the SDLT regime can be notified online via either the Stamp Taxes website or via third party software systems. On receipt of the information required, an electronic submission receipt is generated and is printed out by an applicant for submission with their application for registration. Click here to view a sample SDLT 5 produced by HMRC. Versions produced via third party software systems will vary slightly, but the key information will be available.

Applications where it may be unclear whether evidence is required/sufficient

The paragraphs above set out a list of circumstances where it is clear that SDLT evidence is required. These circumstances will be apparent from the information provided in the application such as the contents of the registrable deed. However, there will be applications when the information in the application does not allow a registration officer to reach a decision as to whether a certificate is required. For example, some forms of lease (particularly windfarm leases or leases relating to power generation) may not ex facie specify a monetary rent. Another example is a sub-sale, where a disposition which is a grant by A, with the consent of B, to C where B acquired right to the property via missives / contract but has instead of registering a disposition in their favour) immediately transferred their interest to C and a single disposition is being used to complete both transactions rather than two separate dispositions each being presented for registration.

In the first situation, if an SDLT certificate is not being submitted, the applicant should enclose a letter confirming that the transaction is a not notifiable for the purposes of SDLT. In the second situation, usually an SDLT certificate will be submitted for the transaction in favour of C but there should also be enclosed a letter (from C or C's agent or B or B's agent) certifying that B acquired the land from A and transferred it to C in pursuance of a free-standing transfer for the purposes of Schedule 2A of the Finance Act 2003. A requisition in cases of doubt can be raised to seek such evidence and the case be placed in standover for the 42 day period. 

A referral should be made to a senior caseworker, who will if necessary seek further advice if there is any doubt as to whether the evidence actually produced with the application is sufficient.