Stamp Duty Land Tax
Update on Higher Rates for Residential Property from 1 April 2016
The Treasury was busy over Christmas, and on 28 December 2015 published some refinements to the proposed changes to Stamp Duty Land Tax (SDLT). The government had already announced in the 2015 Autumn Statement that higher rates of SDLT (increased by 3%, with a lower starting point of £40,000) will be charged on purchases of residential property which will be used as Buy to Lets or second homes from 1 April 2016.
The 28 December document is only a consultation, so whilst it is not the final legislation, it seems that we now know pretty well what HMRC want the legislation to say once the Finance Bill 2016 is drafted. The main points reflected in the new HMRC document are:
- Companies owning 15 or more properties. The government’s initial comments seemed to suggest an exemption for companies owning 15 or more properties. They have reconsidered this and there will be an exemption from the higher rates of SDLT for bulk purchases of 15 or more properties by a company, irrespective of the number of properties already owned. That exemption may also be applied to individuals making such a bulk purchase.
- Contracts exchanged but not completed until after 1 April 2016. HMRC have clarified that “If contracts are exchanged after 25 November 2015 then the higher rates will apply if the purchase is completed on or after 1 April 2016. However, if contracts were exchanged on or before 25 November 2015 but not completed until on or after 1 April 2016, the higher rates will not apply.”
- Parents buying properties for their children. HMRC state that if a parent buys a property outright for their child to live in, or buys it jointly with their child, then the higher rates of SDLT will apply to the whole purchase. If instead the parent gifts the funds to their child who subsequently buys the property, then only the normal rate of SDLT applies.
Finally, the government proposes that properties bought as furnished holiday lets should be treated in the same way for the higher SDLT as all other residential properties.
Our comment on the original SDLT proposals are in our 25 November blog.