Higher rate of Stamp Duty Land Tax (SDLT) on purchases of additional residential properties - CIOT comments

By Technical Team on 01 Feb 2016

The CIOT responded to HM Treasury’s consultation on higher rates of Stamp Duty Land Tax (SDLT) on purchases of additional residential properties, published on 28 December 2015. 

We pointed out that the short period in which to respond to a consultation (deadline 1 February 2016) involving a fairly radical change to the SDLT regime is challenging, both for those responding, and for HMRC in implementing the changes required in time for 1 April 2016.

The CIOT had a number of key concerns:

  • The apparent inconsistency in the proposals that those who already own a buy to let but have not yet purchased a main residence will be subject to the higher rate on the purchase of a (first) main residence. By contrast a person who sells a main residence can acquire a buy to let and subsequently replace their main residence without incurring the higher rates on either purchase.
  • The imposition of the higher rates will impose greater complexity on the SDLT regime which is not designed to make decisions about how a purchaser intends to use a property. The burden of administering the complexities of the higher rates will fall largely on conveyancers who may not have tax expertise.
  • The intention is to treat married couples and civil partners living together as one unit unless separated under a court order or by a formal Deed of Separation under seal. We recommended that the definition of separation is extended to include factual separation in circumstances in which the separation is likely to be permanent.
  • A joint purchase may be made for reasons that have a clear social value and that are not contrary to the stated policy intent. Therefore imposing higher rates on the entire consideration appears inequitable. However the inequities inherent in the current proposals for joint purchasers might be mitigated by a targeted relief for situations that accord with the policy intent such as parents helping children on to the housing ladder.
  • We noted that it is intended that similar factors as for CGT private residence relief (PRR) will be used to determine whether a UK property is a main residence. While there will be no right to elect which residence is the main residence for SDLT, it would be a useful simplification if existing CGT PRR elections are regarded as indicative for SDLT higher rates purposes, as the complexities in determining a main residence should not be under-estimated.
  • We suggested that a targeted relief from the higher rate is considered where the purchaser of the ‘old’ main residence defaults following exchange. 
  • In terms of property interests worth less than £40,000, we agree that a disregard by reference to value should be workable in most cases but we are concerned that the valuation of a lease may present difficulties. Consideration might be given to a disregard of a short lease of a less than 7 years.

Technical Team

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