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Budget 2016 – Increased SDLT Rates for additional residential properties

by Published on

Broadly the new rates stipulate that a further 3% of Stamp Duty Land Tax will apply to the acquisition of additional residential properties.  The details announced yesterday confirmed that the acquisition of a residential property entered into by an individual will be considered to be a higher rate transaction if any of the following three conditions are satisfied:

  1. The main subject of the transaction is a major interest in a single dwelling (that is not subject to a lease of more than 21 years) and that at the end of the day upon which the transaction takes place the buyer has a major interest in another dwelling (that is not subject to a lease of more than 21 years) and the property being purchased is not a replacement for the buyer’s only or main residence.
  2. The main subject matter of the transaction is a major interest in two or more dwellings (that are not subject to a lease of more than 21 years) and the chargeable consideration apportioned to the relevant dwellings is £40,000 or more each.
  3. The main subject matter of the transaction is a major interest in two or more dwellings, the interest in at least one of the dwellings not being subject to a lease of more than 21 years, and that dwelling is not a replacement for the buyer’s only or main residence, and that at the completion of the transaction the buyer has a major interest in another dwelling.

The definition of “dwelling” is that of a building that is suitable for use as a single dwelling or is in the process of being constructed or adapted for such residential use.  It does include the gardens or grounds and any such land that is for the benefit of the building that makes up the dwelling.

A dwelling will be the replacement of an individual’s only or main residence if the buyer intends that the dwelling is to be their only or main residence and the buyer has sold their previous or only main residence in a three-year period ending on the effective date of their purchase of the new dwelling.

The increased SDLT rates will not apply when an individual purchases a property and intends for that to be their only or main residence, and they sold their previous main residence within the previous three years prior to the date of completion of that transaction.  In the circumstances where a dwelling may at a later date be a replacement of an individual’s only or main residence then they can seek to reclaim any overpaid SDLT once the existing only or main residence is sold.

For the purposes of this assessment spouses and civil partners are to be treated as ‘one unit’ so that they are entitled to one main residence between them, unless they are separated in circumstances that are likely to become permanent.

Single persons who are beneficially entitled to the property under a Trust and have a life interest or interest in possession in a residential property will be treated as buyers, holders and sellers of the dwelling for the purposes of this legislation.

Finally, the details in the legislation did not contain the anticipated exclusion from the increased rate for large scale investment by investment funds and corporates.

This legislation will be included in the Finance Bill 2016.

The HMRC website has updated its online calculator to the include amount of SDLT due on high rate transactions.

 

David Williams

Associate Solicitor

Samuel Phillips Law Firm

Email:     davidwilliams@samuelphillips.co.uk

DD:         0191 255 0265

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