Home Forums Patrick Cannon Is payment of legal fees part of the consideration for SDLT?

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  • #737 Reply

    I’d appreciate any advice you may have on the situation below.

    A number of properties are currently owned by 2 parties who are in dispute and who also run a business from another property.

    They have an informal agreement whereby party A will pay a sum to party B and the properties will be transferred into the sole name of party A.

    The business which they run will then also be run solely by party A, although this is not to be documented in any formal manner.

    The amount which they are paying if all taken into account for SDLT would attract a charge at 3%. They intend to put lower figures in the transfers which will attract a linked transaction charge of 1%.

    They claim that a large amount of the money payable will go to pay off party B’s legal fees for the dispute and/or to pay for the transfer of the business/goodwill into party A’s sole name.

    Do you believe that the amount which is said to pay off the legal fees comes under para 8 schedule 4 of the Finance Act 2003 and would therefore attract SDLT as part of the consideration?

    If the buyer is asserting that they are paying a large amount of the sum in respect of the transfer of the business/goodwill, is it necessary for them to provide a formal valuation of the business/fixtures/goodwill to which these relate in order to prove that those advising them are not negligent in their professional duties?

    Many thanks for any advice.

    #738 Reply

    It depends partly on how the settlement is worded but it is not so much an issue with para 8 Schedule 4 but whether the apportionment between the various items is just and reasonable ie commercially defendable, under para 4 Schedule 4. A formal valuation is not strictly required but it sounds as though you are sufficiently concerned about the split to make it prudent to request some type of short-form or “desktop” or “drive-by” valuation to protect yourself in the event of a negligence claim and/or HMRC alleging improper behaviour.

    #739 Reply

    Thank you for your response.

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