HMRC consultation on draft Stamp Duty Land Tax…
We've responded to HMRC's consultation on the draft Stamp Duty Land Tax (Administration) Regulations 2021.
Stamp duty land tax (SDLT) is a tax payable by the purchaser on land transactions.
As a solicitor, it may be that you advise on SDLT. You may also need to file SDLT returns and pay the tax on your clients’ behalf and within the applicable time limits.
This page provides a summary of key points only – see our legal notice.
A solicitor who does not have the necessary specialist knowledge of tax should not advise on it and may need to advise clients to obtain specialist SDLT advice, especially in relation to higher risk transactions.
In Wales, SDLT has been replaced by the land transaction tax.
From 8 July 2020 to 31 March 2021, reduced rates of SDLT apply to residential properties on a temporary basis.
SDLT has become a tax with complex rules about the scope, rates and reliefs.
It is payable when a purchaser acquires a ‘chargeable interest’ in land in England or Northern Ireland. The amount payable is based on the ‘chargeable consideration’. Often this is the price the purchaser pays for the property or land, including any fixtures and fittings.
Where an individual buys their only residential property to occupy themselves, the thresholds and rates applicable are relatively straightforward, as follows.
If the chargeable consideration is £500,000 or under then no SDLT is payable for residential properties purchased from 8 July 2020 to 31 March 2021 inclusive.
If the price is above the threshold, the purchaser must pay SDLT on the portion over £500,000. The rate increases in bands, starting at 5% for the next £425,000, and going up to 12% for any portion above £1.5 million.
From 8 July 2020 to 31 March 2021 inclusive, those buying their first home pay the same reduced SDLT rates for residential properties.
There are different rules, rates and thresholds for non-residential and mixed-use property.
There are special rules for calculating SDLT on rents.
There is also a 15% flat rate of SDLT that applies to certain high value residential property acquisitions by non-individuals. (This is separate from the higher rate for additional dwellings provisions explained below.)
Higher rates are charged for a purchase of certain additional residential properties by an individual and for a purchase of any dwelling by a non-individual, if the chargeable consideration is £40,000 or more.
This may therefore apply, for example, when an individual purchases a buy-to-let property or a holiday home, if the purchase means the individual will own more than one property.
The purchaser must pay 3% on top of the revised standard rates from 8 July 2020 to 31 March 2021, subject to any applicable exemptions or reliefs. This means that for additional properties purchased for £500,000 or less, for example, SDLT will be charged at 3% on the whole purchase price.
The government’s SDLT calculator may help you to work out the tax payable.
A land transaction is chargeable to SDLT unless an exemption or relief applies.
Between 8 July 2020 and 31 March 2021 inclusive, the relief for first-time buyers is replaced by the reduced SDLT rates for residential properties.
If the purchaser is a first-time buyer and the price of the property is £500,000 or less, they can claim first-time buyers' relief on property purchased before 8 July 2020 and after 31 March 2021.
The property must be a residential property that the buyer intends to use as their main home. They will pay no SDLT up to £300,000 and 5% on the portion from £300,001 up to £500,000.
If the chargeable consideration is more than £500,000 the purchaser cannot claim first-time buyers' relief and must pay the standard rate.
Several other reliefs can be claimed, including for:
If the purchaser is buying a property through a shared ownership scheme operated by an approved qualifying body such as a housing association or local authority, they can decide to either:
If they choose to pay SDLT just based on the initial share, they will need to make a further payment if they later buy additional shares that take their ownership above 80%.
The purchaser must file a land transaction return even if they do not need to pay any tax, unless the transaction is exempt from SDLT or from notification. You may be required to do this on the purchaser’s behalf.
You do not have to file a return if a land transaction is exempt from SDLT, such as where there is no chargeable consideration.
A land transaction may also be exempt from notification, for example, where it is a grant of a lease for a term of less than seven years where the chargeable consideration does not exceed the zero-rate threshold.
The purchaser must file the return and pay the tax within 14 days of the ‘effective date’ of the transaction. However, you may be obliged to do this on behalf of the purchaser/buyer, for example if their mortgagee requires it.
The ‘effective date’ is usually the completion date, but it can be the date when the contract is ‘substantially performed’ if this happens before completion – for example if the purchaser is given possession of the property early.
If you’re a solicitor you will need to register to use HMRC’s Stamp Taxes Online service. Find out how to register.
You can then submit SDLT returns online.
As soon as you submit the return you will receive an online SDLT5 certificate and a unique transaction reference number (UTRN). You’ll need to send the UTRN to HM Land Registry when you make an application to register the transaction.
A person who is not a solicitor or conveyancer cannot file a return online and will need to send a paper return to HMRC, using form SDLT1. It must include a valid local authority code and be signed by the purchaser.
The deadline for paying the tax is the same as the deadline for filing the return: 14 days from the effective date of the transaction.
When paying, it’s important to use the correct 11-digit UTRN and the correct HMRC bank account. This will allow HMRC to link the payment to the SDLT return. If you filed online, the UTRN will be on the SDLT5 certificate. If you filed a paper return, the UTRN is on the payslip at the back of the form.
There are several ways to pay. Some methods take longer than others and you’ll need to allow enough time for the payment to go through before the deadline. Payment methods include:
A penalty of £100 is payable for a late return, or £200 if it is more than three months late. A tax-based penalty may also be imposed if the tax is not paid within 12 months of the filing deadline. Interest is charged on the amount owed.
You should be aware of the anti-avoidance measures applicable to SDLT.
There are anti-avoidance rules contained in the SDLT legislation, notably the wide rules at section 75A, 75B and 75C of the Finance Act 2003 and the rules on linked transactions at section 55 of the Finance Act 2003.
There are also relevant measures outside of the SDLT legislation, including the rules of the Disclosure of Tax Avoidance Schemes (DOTAS) and the General Anti-Abuse Rule (GAAR), both of which apply to SDLT.
The government regularly makes changes to SDLT which are often announced in the Budget. Changes are usually introduced through the Finance Act each year.
The chancellor of the exchequer announced a temporary reduction to SDLT rates in response to uncertainty in the housing market as a result of coronavirus (COVID-19).
The residential property value at which SDLT begins to be paid has been raised from £125,000 to £500,000. The 3% SDLT surcharge for purchases of additional properties continues to apply on top of the temporarily reduced rates.
The revised rates take effect from 8 July 2020 and remain in effect until 31 March 2021.
HMRC has produced guidance on the temporary reduced rates.
The government announced it will introduce a 2% SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland from 1 April 2021.
The SDLT changes announced at Budget 2017 and Budget 2018 which are enacted in the Finance Act 2019 include:
These three changes are explained in some more detail below.
Relief for first-time buyers was extended to purchases of qualifying shared ownership property where the purchaser chooses not to make a market value election but to pay SDLT in stages.
Where the market value of the shared ownership property is £500,000 or less, the SDLT rates for first-time buyers are applied to the first share purchased. Relief will also apply to the rental payments.
Buyers who make a market election were already eligible for the relief.
The changes took effect on 29 October 2018 and apply retrospectively from 22 November 2017.
The buyer can claim a refund of tax if:
Purchasers who have made a market election can also claim refunds for SDLT paid on the rent.
The time limit for claiming a repayment of SDLT was extended for buyers who pay the higher rate for additional dwellings (HRAD) on the purchase of a property which they intend to be used as a main home, and who later sell their previous main home. The buyer must claim either:
The changes apply where the old main residence is sold on or after 29 October 2018.
The definition of ‘major interest’ was also changed for the purposes of HRAD to make clear that it includes an ‘undivided share’ in a dwelling.
As confirmed in the autumn 2017 Budget, the time limit to file an SDLT return and pay the tax due reduced from 30 days to 14 days, for all transactions on or after 1 March 2019.
In February 2019 the government published a consultation on plans to charge an additional 1% on top of existing SDLT rates for non-UK residents buying property in England and Northern Ireland. This is in response to concerns that purchases by non-UK buyers are pushing up house prices.
We responded to the consultation in May 2019. We are concerned that there is not enough evidence to show that the extra charge would meet the government’s policy objective. The changes would further complicate the home buying process. We suggested changes to avoid potential unfairness.
The government announced at the Budget in March 2020 that it will introduce an SDLT surcharge at a rate of 2% on non-UK residents purchasing residential property in England and Northern Ireland from 1 April 2021.