Stamp Duty 

Q&A: What are the changes to stamp duty land tax?

Q&A: What are the changes to stamp duty land tax?

Q: Could you explain some of the main points relating to the stamp duty land tax announcements for the Finance Bill 2018?

A: Firstly, first-time buyer (FTB) relief was introduced by the chancellor on 22 November 2017 and applies to all relevant transactions provided the effective date of the transaction is on or after that date. The purchase must be of a single dwelling.

The relevant consideration must not be more than £500,000 and on a dwelling purchased by a FTB intending to occupy the dwelling as a main residence or as the only residence.

There must be no linked transactions (other than the purchase of a garden or grounds that subsist for the benefit of the dwelling).

A FTB is an individual who has never previously acquired a ‘major interest’ in a dwelling (or an equivalent interest in land) situated anywhere in the world. In this context, a ‘major interest’ means any freehold or leasehold interest, not necessarily the majority ownership. Such an interest could be acquired by inheritance or gift, but it does not apply to acquisition as a Trustee.  If the property is owned jointly, all of the purchasers must meet all of the conditions.

The effective date of the transaction is normally completion but can be earlier if the transaction has been substantially performed before that date. For example the buyer taking possession or the vendor receiving 90 per cent of the sale proceeds.

The effect of the relief depends on the relevant consideration.

Up to £300,000, no stamp duty land tax is payable. For acquisitions over £300,000 and up to £500,000, stamp duty land tax is payable at 5 per cent. The relief must be claimed on a land transaction return using code 32 in the appropriate field of the return.

Secondly, a relaxation of certain clauses of the higher rates for additional dwellings will be introduced.

Again, the changes will be effective for transactions on or after 22 November 2017.

The higher rate charge will not be applied where an individual buys a property from their spouse or civil partner.  Such a purchase had previously given rise to the higher rate (3 per cent) additional charge.

A property will be ignored for the purpose of the rules if the owner under certain property adjustment orders has retained it. This is commonly in the case of divorce where the absent spouse is required to retain their interest in the matrimonial home under a court order, quite often seen where minor children are involved.

Finally, a loophole has been closed. It is possible to claim relief from the higher rate where the new property is the replacement of the only or main residence. This clearly requires a disposal of a former residence. The revision to the legislation requires that the disposal must be to someone who is not the seller’s spouse or civil partner.

Ben Chaplin is managing director of Croner Taxwise