SDLT is one of the significant tax burdens to any property investor, developer or trader. However, proper SDLT structuring can lawfully reduce SDLT liability resulting in a significant reduction in initial capital investment and return on capital.
Depending upon the property you are acquiring, and any plans on the property, SDLT experts at UK Property Accountants will review all the options available to you and structure the deal to reduce your SDLT bill. We only use the tax planning that is legally allowed and is not caught up by HMRC anti-avoidance provisions.
Some examples of SDLT structuring models we use are detailed below:
Sale of land with associated construction contract
Under this structure, the vendor agrees to sell land to the purchaser at a certain price, and the vendor also agrees to carry out the work at the sold land. The vendor receives both the price for the land and the money for the work it carried out in the land. The split of the consideration between the land price and the value of construction work provides some SDLT planning opportunities. Careful structuring for SDLT is required for this to work.
This planning model follows from the famous case of Prudential Assurance Co Ltd v IRC , which HMRC accepts as applying to SDLT. HMRC guidance says, "Where the sale of land and the construction, etc. Contract are in substance one bargain, as they were in the Prudential case, there must be a just and reasonable apportionment of the total consideration given for all elements of the bargain in order to arrive at the chargeable consideration for SDLT purposes."
Use of group company in SDLT structuring
We use SDLT group relief, reconstruction relief and acquisition relief substantially to achieve the best outcome for SDLT. There are a substantial number of options under this model, depending upon your situation.
Converting residential rates to non-residential rates
Residential SDLT rates are quite significant compared to non-residential rates. Depending on the deal's feasibility, we explore ways to deal with usual residential rates (up to 15%) to the non-residential transaction to achieve substantial SDLT savings.
Use of partnership and LLP in SDLT structuring
SDLT legislation has quite peculiar provisions in relation to the partnership, which can be exploited to achieve the best SDLT structuring solution. Obviously, any use of partnership without proper planning and business rationale can always be challenged by HMRC under anti-avoidance provisions. So, a professional SDLT review is required for each situation to obtain the best use of partnership in SDLT structuring.