The Chancellor’s shock announcement in the November 2015 Autumn Statement that people purchasing second homes or buy to let properties would have to pay an extra 3% Stamp Duty Land Tax after 1 April 2016 sounded straightforward enough. However the detail of the proposal was not immediately available and is still not clear.It is established that the new rates will only apply where the contract for sale was exchanged after 25 November 2015 and the transaction is completed on or after 1 April 2016. The full details of the proposal were not published in the consultation paper until 28 December 2015. The five week consultation period was very short and ran from 28 December 2015 until 1 February 2016 so is now closed. The final tax details will not be announced until the Budget on 16 March 2016
The purpose of the consultation was ostensibly to allow consideration of circumstances in which a transaction would be subject to the higher rates, including identification of difficult cases and the circumstances where exemption from the higher rates may be justified. The paper runs to 29 pages, most of which is taken up with the policy design and it puts forward concepts such as:
Married couples and civil partners living together (ie unless the relationship has broken down and they are separated under a court order of by a formal deed of separation executed under seal) will be treated as one unit.
Joint purchasers: if any of them has two or more properties and is not replacing a main residence, the higher rates will apply to the entire consideration.
Parents buying jointly with their children to help them to get onto the property ladder will be subject to the higher rates if they jointly own the property and have another main residence.
Delay between sale of an only or main residence and purchase of a new one results in payment at the higher rate, then refund if the sale takes place within 18 months of the purchase.
There is no ability to elect what is the only or main residence (it will be based on fact).
Property owned outside England, Wales and Northern Ireland is relevant in determining whether property purchased in England, Wales and Northern Ireland is an additional property and therefore subject to the higher rates.
Non-residential property will not be taken into account (this includes agricultural land, mixed use property or six or more residential properties bought in a single transaction).
Large scale investors (at least 15 residential properties) - the government has not made up its mind whether this applies only to corporates and funds (as mentioned in the Autumn Statement) or whether to include individual investors.
The treatment of trusts and settlements depends on the type of trusts. The higher rates will apply unless, simply put, the beneficiary of the trust is resident in the property and does not have another only or main residence, or the new property replaces the only or main residence.
Purchase of a buy to let residential property is not subject to the higher rates unless the purchaser owns another property. Band Existing residential SDLT rates New additional property SDLT rates£0* - £125k0%3%£125k - £250k2%5%£250k - £925k5%8%£925k - £1.5m10%13%£1.5m +12%15%
We are here to help you navigate the complexities of this new tax regime.
In complex cases, our tax team headed by Bob Neal is able to advise on your Stamp Duty Land Tax liability and what reliefs may be available to you, such as multiple dwelling relief and whether your transaction is non-residential because the property is mixed use.