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Where Taxpayers and Advisers Meet

Higher rate SDLT

rexrex
Posts: 3
Joined: Thu Nov 29, 2018 2:04 pm

Higher rate SDLT

Postby rexrex » Thu Nov 29, 2018 2:23 pm

Hello all

I was wondering if this policy has some odd effects... or if I'm just misunderstanding how it works

Mr A has never owned his main residence. He has lived with his elderly parents and travelled extensively for work (staying in hotels). His parents' home has always been his main residence. He bought a buy-to-let flat many years ago but does not own any other property.

He is now planning to buy a main residence.

A) The flat will cost £160,000.
B) It is a share of freehold, with the leasehold element being for 75 years.
C) He is planning to keep the buy-to-let flat.
D) The flat will become his main residence.

Questions
1. Is Mr A liable for SDLT additional rate? (The legislation and HMRC guidance seem to have some confusing punctuation and syntax...?)
2. If he is, how can he avoid the SDLT additional charge without selling his buy-to-let?
3. Other things being equal, is he worse off (from a tax point of view) than someone who previously owned a main residence and a buy-to-let, who then sold their main residence and bought a new one? (It seems unfair that to get to the point of owning a home and having an investment, someone who has previously not owned their home would be penalised.)

Any answers/comments/suggestions gratefully received. :P

References:
Legislation http://www.legislation.gov.uk/ukpga/2016/24/section/128/enacted
HMRC manual https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09730

AGoodman
Posts: 865
Joined: Fri May 16, 2014 3:47 pm

Re: Higher rate SDLT

Postby AGoodman » Thu Nov 29, 2018 3:37 pm

1. Yes
2. If you find a way, I would love to hear it
3. Yes - that person would not pay the higher rate.

Yes, it is unfair.

rexrex
Posts: 3
Joined: Thu Nov 29, 2018 2:04 pm

Re: Higher rate SDLT

Postby rexrex » Thu Nov 29, 2018 11:32 pm

Thanks for your quick reply.

Would you be able to explain how Condition B works please?

rexrex
Posts: 3
Joined: Thu Nov 29, 2018 2:04 pm

Re: Higher rate SDLT

Postby rexrex » Fri Nov 30, 2018 1:09 am

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09765

SDLT - higher rates for additional dwellings: Individuals – summary of Conditions
The higher rates will apply to the purchase of a major interest in a single dwelling by an individual, if at the end of the day of purchase Conditions A to D are met [Para 3(1)]:

Condition A - the chargeable consideration is £40,000 or more;

Condition B - the dwelling is not subject to a lease which has more than 21 years to run on the date of purchase;

Condition C - the purchaser owns a major interest in another dwelling which has a market value of £40,000 or more and is not subject to a lease which has more than 21 years to run at the date of purchase of the new dwelling; and

Condition D - the dwelling being purchased is not replacing the purchaser’s only or main residence.


If any of Conditions A to D are not met the higher rates will not apply to the purchase.

AGoodman
Posts: 865
Joined: Fri May 16, 2014 3:47 pm

Re: Higher rate SDLT

Postby AGoodman » Fri Nov 30, 2018 10:41 am

You are buying a 75 year lease. That lease is not itself subject to a lease so Condition B applies.

Arguably Condition B may not apply to the share of freehold but I imagine the value of that is a tiny part of the price you are paying. (there may also be some legislation on this point, I don't know).

someone
Posts: 383
Joined: Mon Feb 13, 2017 10:09 am

Re: Higher rate SDLT

Postby someone » Fri Nov 30, 2018 1:05 pm

You are buying a 75 year lease. That lease is not itself subject to a lease so Condition B applies.

Arguably Condition B may not apply to the share of freehold but I imagine the value of that is a tiny part of the price you are paying. (there may also be some legislation on this point, I don't know).
Probably clutching at straws but in this case the share of freehold might have non-negligible value if it allows the lease to be extended at no charge.

ISTM you could get a valuation for an equivalent lease without the share of freehold and argue that that is the value for SDLT purposes.


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