Scope: when is Stamp Duty Land Tax (SDLT) chargeable: higher rate charge for acquisitions of residential property by certain non-natural persons FA03/S55/SCH4A: acquisition for resale as the stock of a property trading business FA03/SCH4A/PARA5
Where a chargeable interest is acquired exclusively for resale as the stock of a property trading business, the 15 per cent higher rate charge will not apply to the transaction. Instead, SDLT will be charged at the standard rates.
However, a further return and payment of additional SDLT will be required if the relevant rules in Withdrawal of relief (SDLTM09660) below apply.
A property trading business is defined as one that consists of or includes activities in the nature of a trade of the buying and selling of dwellings. For the business to amount to a trade it must be run on a commercial basis and with a view to a profit.
Whether that trade is run on a commercial basis will need to be established by reference to all the facts. If a company purchases a property in the expectation that in a few years time it will be able to sell the property for a higher price that may not be sufficient to make the activity amount to a trade. It may instead be an investment activity which does not qualify for exclusion from the 15 per cent rate.
For more information on trading see HMRC’s Business Income Manual (BIM20000 onwards).