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HMRC internal manual

Stamp Duty Land Tax Manual

From
HM Revenue & Customs
Updated
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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: 10 per cent or greater share of a company

The definition of 10 per cent or greater share in a company is derived from Section 147 FA 2013. Relief will not be available where an employee or partner holds more than 10 per cent of a company that is entitled to a single-dwelling interest. When applying this test a broad approach is required by the legislation: an individual will be treated as crossing this threshold where he or she possesses (directly or indirectly) or is entitled to acquire

  • 10 per cent or more of the share capital of the company,
  • 10 per cent or more of the issued share capital of the company,
  • 10 per cent or more of the voting power in the company,
  • so much of the issued share capital of the company as would, on the assumption that the whole of the income of the company were distributed amongst the participators, entitle that person to receive 10 per cent or more of the amount so distributed, or
  • such rights as would entitle that person, in the event of the winding up of the company (or in any other circumstances), to more than 10 per cent of the assets of the company which would then be available for distribution among the participators.

‘Participators’ is defined for these purposes by the close company’s rules - see CTM60107 (external users can find the guidance at http://www.hmrc.gov.uk/manuals/ctmanual/CTM60107.htm).

It should be noted that certain rights will be attributed to the employee or partner (‘A’) when applying this test, including those which

  • are held by another on A’s behalf,
  • are held by another who may be required to exercise those rights on A’s direction or behalf,
  • are held by a company of which A (or A and his associates) have control, or
  • are held by any associate or associates of A.

‘Associates’ is defined in Part 10 of CTA 2010 (see section 448 and CTM60150 (external users can find the guidance at http://www.hmrc.gov.uk/manuals/ctmanual/CTM60150.htm).

For the purposes of this provision, however, a person is not an associate of another merely because they are both members of a partnership. Where two partners are associates for reasons other than their membership of the same partnership, they will still be treated as associates.

Even if these conditions are not met, a person will be treated as having a 10 per cent or greater share of a company if he or she exercises, or is able to exercise, or is entitled to acquire direct or indirect control over the company’s affairs.