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stamp duty land tax - a summary of updates
1 February 2021
There’s a good chance you’ll have read before that Stamp Duty Land Tax (SDLT) has undergone more changes since its inception in 2003 than any other similar tax. It comes as no great surprise, then, that it can be hard to keep up with the ever changing legislation and cases surrounding this particular tax. We’ve summarised some of the most recent changes to SDLT, along with the accompanying potential tax savings and opportunities to claim tax back for you.
Mixed Use Property and Multiple Dwellings Relief (MDR) – An opportunity to reclaim?
Those already familiar with MDR will be aware that it enables you to save SDLT when buying multiple properties. It does this essentially, by only paying tax on the combined average cost of each property rather than the overall value of the transaction, therefore pushing the purchase into the higher rates of SDLT. Until recently, HMRC’s guidance stipulated that in cases where mixed properties were acquired, for example a shop with a flat above, the 3% surcharge would apply to the residential part of the transaction. In December, HMRC updated their guidance to confirm the 3% doesn’t apply in such instances, however they won’t be contacting anyone they believe to have overpaid. The timeframe for reclaiming SDLT can be extremely strict, under some circumstances only 1 year. So, if you believe this scenario may apply to you, it’s important to move quickly, in order to secure your repayment.
Temporarily Reduced Rates
On the 8th July, Chancellor Rishi Sunak presented the emergency budget with the aim of supporting the hemorrhaging economy due to the impact of the ongoing pandemic. One of the measures announced was the reduction of the SDLT rate to zero for the first £500,000 being paid for any residential property purchased before 31st March 2021. With this date fast approaching, consideration should be given to whether it might be possible to utilise the reduced rates whilst the opportunity exists (bear in mind the 3% surcharge will still apply to any additional property). There are however increasing calls for an extension to the deadline due to the difficulty in completing transactions before the 31st March, and the potential for thousands of purchases to fall through. Whether the government takes heed or not will most likely be seen in the budget in early March.
The 3% surcharge – Additional time to reclaim
Under some circumstances, it’s possible to reclaim the 3% SDLT surcharge if you fully dispose of your previous main residence within 3 years of buying a new main residence, which was, at the time, subject to the 3% tax.
HMRC have very quietly updated their guidance to suggest they’ll allow claims falling outside of the 3 year window, on the condition you can provide evidence to show your disposal was delayed due to Covid-19. This is a new, and so far untested extension provided by HMRC, so the exact scenarios which will be allowable, or not, are yet to be fully established. HMRC have however suggested they’ll only grant an extension in exceptional circumstances.