Many happy (tax) returns to SDLT
Jan 6 2009 by Karen Dent, The Journal
STAMP Duty Land Tax celebrated its fifth birthday on December 1, and as a little present to HM Revenue & Customs, tenants may have to give them even more money.
SDLT was introduced in 2003 to replace Stamp Duty on land purchases including leases. It is a self-assessment tax and the onus is on tenants to comply with the rules. The earliest leases granted under this regime are approaching their fifth birthday and this could trigger obligations to make additional SDLT returns and pay additional tax.
Tenants must be aware of any provisions in their leases which may oblige them to make subsequent SDLT returns in good time to avoid paying late submission penalties.
The fifth anniversary of the start of a lease is significant where there will or may be changes in the level of rent, in particular, where the rent is linked (whether wholly or partly) to the turnover of the business of the tenant or where the rent is subject to a rent review in the first five years of the term.
The initial calculation of SDLT is often based on estimates of the rent for the first five years. SDLT must therefore be recalculated when that rent is ascertained.
Once the rent for the first five years of the lease becomes certain, the tenant must recalculate the SDLT using the actual rental figures and revised estimates for any years where the rent had not yet been determined. If the actual rent paid over the first five years is more than the original estimate, then the tenant is required to submit a further SDLT return as well as make payment of the additional tax due. However, it is not all bad news – overpayments of SDLT can also be reclaimed.
A 30-day time limit will operate for notification and payment of any recalculated SDLT, so the first returns and payments may have been due by the end of 2008.
For tax and returns due in December or this month, the festive season may mean the time limit is harder to meet than usual and tenants should seek advice at the earliest opportunity. If they do not, they will risk a significant penalty and interest charges for their delay in the submission of the return or payment of the SDLT.
