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New Stamp Duty relief for first time buyers

One of the most widely reported Autumn Budget announcements was the new relief from stamp duty land tax (“SDLT”) for first time buyers. This was big news and represented the government recognition of the home ownership dream.

Reaction to the move has been mixed. Whilst the relief has been welcomed by many, concern has been expressed, (even by the government that the relief could lead to an increase in house prices, whilst buyers in more expensive parts of the UK have commented that the relief does not go far enough to help them.

What is the relief?

The relief operates so that no SDLT is paid on the first £300,000 of the purchase price for a residential property (note that the relief that does not apply to commercial property). Where the purchase price is over £300,000 but does not exceed £500,000, SDLT is paid at 5% on the amount of the purchase price above £300,000. The government estimates that 80% of first time buyers will pay no SDLT at all.

When does the relief apply from?

The relief applies from 22 November 2017 and applies from the “effective date” of the contract. This is normally completion although it could be earlier if, for example, the buyer takes possession of the property or pays most of the purchase price in advance of completion. So, if a buyer is relying on the relief being available, they should check that they have not triggered the effective date of the contract before 22 November 2017. Legal advice should be sought.

If a buyer has completed before 22 November 2017, they cannot get a refund of any SDLT paid.

Who is a first time buyer?

There is no age limit on claiming this relief. A first time buyer can be a buyer of any age!

However, both buyers must be first time buyers. So, for example, if a spouse owned a property before marriage, the relief will not be available.

Similarly, if a person inherits a property and uses the sale process of that inherited property to purchase another property , SDLT relief will not be available, nor will relief be available if the buyer has previously owned an inherited property. So, for example, if a grandchild inherits a share in a property which is sold, and that share of the proceeds is passed on to them to fund the deposit for their first property, the relief will not be available to them as they have already part owned a property.

If a buyer owns a rental property, and buys a house for them to live in, the relief will not be available.

A buyer must intend to use the purchased property as their only or main residence, so if there are joint buyers and only one of them intends to use the property as their only main residence, relief will not be available.

There are some special rules for trustees and beneficial interests. If a buyer has previously held a beneficial (or equitable) interest in a property (except a leasehold interest of less than 21 years), they cannot claim the SDLT relief. However, if a buyer has previously bought a property as trustee, they can claim the SDLT relief provided that they were not also the beneficiary of the trust (and they meet the other conditions).

Finally … there is a clawback

There is also a trap if additional land is bought. For example, if a buyer claims the relief and later buys some additional garden, and the total price for both the house and garden exceeds £500,000, the SDLT relief will be lost. The buyer will need to repay the SDLT relief previously claimed, file a further SDLT return and pay any additional SDLT due on the garden.

Finally, the buyer must buy the property for themselves and must not be buying a property for someone else. Therefore, this new relief will not help parents buying a property for their child, even if that child has not owned a property before. Please note that this article is intended for general use only and is not intended to constitute legal advice. Legal advice must always be sought on the specific facts of a particular situation. This note is drafted on the basis of tax law, practice and interpretation thereof as at the date of this document.

Published: 22 November 2017

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November 2017

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Sarah Cardew