Irwin Mitchell | Changes to Stamp Duty Land Tax

Owning a home is an aspiration for millions of people, but there are many factors which contribute to whether you can afford to. The payment of stamp duty land tax (SDLT) can add a substantial cost to the house buying process, and the rules surrounding the calculation and exemptions to SDLT are complex.

There’s been a lot of major tax policy reforms over the last few years, including those introduced by the Spending Review and Autumn Statement 2015 which re-focused support for housing towards low-cost home ownership for first-time buyers.

Examples of the changes implemented and proposed include:

Changes to the percentage payable and charge bands to which they apply were made in December 2014 resulting in less tax for people buying homes for under £937,000
The introduction of higher rates (3%) of SDLT on purchases of additional residential properties from 1 April 2016 (subject to a three-year window)
Relief from SDLT for first time buyers from 22 November 2017, for the purchase of residential properties for £500,000 or less, provided the purchaser intends to occupy the property as their only or main residence. This was extended on 29 October 2018 to those purchasing through approved shared ownership schemes (who choose to pay SDLT in stages) applying from 22 November 2017
Rules to curb demand by non-residents are planned where overseas investors will be hit with an additional 2% stamp duty surcharge on the purchase of homes in England – April 2021.

During these uncertain times and the implications that COVID-19 is having on the property industry and buyers’ personal circumstances, whether that be affordability, job security or the ability to secure a mortgage, questions are being raised on whether further and immediate reform should be considered.

Ministers will no doubt see this as an opportunity to reset a number of regulations, including planning. However, economic theory is usually outweighed by political imperative, and politically it will be very hard for the Government to lose a tax that results in a revenue of approximately £13 billion.

However, on 3 June 2020 the Treasury published a written ministerial statement on SDLT which accepted that the lockdown restrictions implemented in March resulted in more than 450,000 conveyancing transactions being put on hold. Thankfully regulations were updated on 13 May 2020 lifting some of the restrictions initially placed on the housing market, and the Government has recognised that as a result of such restrictions, some people have been unable to sell a previous main residence within the three year window allowed in order to qualify for a refund of the three per cent higher rates of SDLT.

Whilst the three-year window will not be changing for most taxpayers, in certain specific cases, an extension to the three-year window can now be granted by HMRC once a property is sold if an affected taxpayer was not able to make a sale within the three-year window due to exceptional circumstances outside their control. The ministerial statement provides that:

Affected taxpayers must make a sale as soon as practicable once the exceptional impediment to sale ceases to apply, and this amendment applies to those whose refund window ended on or after 1 January 2020
HMRC will set out operational guidance on the cases which will qualify for an extended refund window in due course. Taxpayers can write to HMRC setting out their individual circumstances and HMRC will make decisions to grant an extension on a case by case basis. HMRC will also closely monitor the number and type of applications for an extension, as a protection against cases of fraud and abuse.

The operational guidance is still awaited and it is yet to be seen how many applications will be successful.

Whilst there has been mention of (and some strong petitioning for) a potential SDLT holiday and relief for those looking to downsize (to increase social mobility) there’s no evidence that there will be any immediate radical changes, and we are not due a budget until Autumn. Government will also be busy designing the regime for the additional 2% surcharge due to take affect from April 2021, amongst other (no doubt) important and pressing items on their agenda.

Published: June 2020

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June 2020

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Changes to Stamp Duty Land Tax

June 2020

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June 2020

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