As part of its ‘Promote, Prevent, Respond’ strategy, HM Revenue and Customs (HMRC) is in the process of writing to housing associations that have submitted Stamp Duty Land Tax (SDLT) returns in recent years and have potentially failed to account for higher rates of tax. 

The letter draws attention to a number of common errors which, according to HMRC, they are seeing in SDLT returns submitted by housing associations: 

• Failure to apply the higher rates of SDLT that apply to the acquisition of dwellings by companies (unless subject to relief from SDLT or the lower rates of SDLT that apply to acquisitions of non-residential property).
• Incorrect claims for relief for acquisitions by registered social landlords. In summary, non-profit registered providers of social housing are exempt from SDLT if property is acquired from certain ‘qualifying bodies’ (e.g. local authorities or another registered provider) or with the assistance of certain ‘public subsidies’ (e.g. social housing grant).
• Incorrect claims for Charities Relief from SDLT. HMRC makes the point that it is generally accepted that Charities Relief is not available where a charity purchases property for re-sale. 

HMRC’s letter also refers to errors in relation to the application of the 15% rate of SDLT to ‘high value residential transactions’ (i.e. the acquisition of dwellings costing more than £500,000, which are not used for rent), multiple dwellings relief (where more than one dwelling is acquired, this allows the SDLT liability to be calculated with reference to the average price of the dwellings), and relief for acquisitions under compulsory purchase orders. However, we would expect housing associations to rarely come across these particular issues in practice. 

Clearly, HMRC is concerned about the level of SDLT compliance failures within the social housing sector. Registered Providers might therefore wish to review SDLT returns filed within the last 12 months, and amend them if necessary, and perhaps take extra steps to ensure that SDLT returns submitted in future are correct. 

Tax governance 

The government continues to introduce measures intended to improve tax governance and tax transparency within the large corporate sector. Although most of these will only apply to the very largest housing associations, awareness of these developments will help inform tax governance within the social housing sector generally. 

From 1 April 2022, certain companies must notify HMRC if a return relating to corporation tax, income tax, PAYE or VAT contains an ‘uncertain tax position’, which arises when: 

• Provision has been made in the company’s accounts to reflect the probability that a different tax treatment will be applied. 
• The tax treatment adopted relies on an interpretation or application of the law that is inconsistent with the way in which it is known that HMRC would interpret or apply the law. 

These new rules apply to companies / groups of companies with UK turnover of more than £200m and/or UK gross assets of more than £2bn. However, this does not include the turnover / assets of Co-Operative and Community Benefit Societies. This, coupled with the fact that uncertain tax positions only need to be reported if the tax exposure is more than £5m means that most (if not all) housing associations will not need to concern themselves with these new rules. 

Large corporates are also subject to Senior Accounting Officer rules, which attributes personal responsibility for maintaining appropriate tax accounting records and processes, and requirements to make their tax strategy publicly available. The companies to which these rules apply are broadly the same as those that are subject to the new requirement to report uncertain tax positions, and so again will not be applicable to most housing associations. 

One tax governance requirement that will apply to all housing associations, however, is that introduced by the Criminal Finances Act 2017, which introduced a corporate criminal offence of failing to prevent the facilitation of tax evasion. If an ‘associated person’ facilitates tax evasion, then the only defence against a potential criminal charge (a criminal conviction and unlimited fine) is that the housing association has implemented reasonable prevention procedures.