Stamp Duty Land Tax (SDLT) Changes from 25th December 2015

Posted on 14th December 2015 Autumn statement

Following the Chancellor’s Autumn Statement delivered on 25 November 2015, higher rates of SDLT will be charged on purchases of additional residential properties (“ARPs”) such as buy to let properties and second homes, from 1 April 2016.

The higher rates will be 3 percentage points above the current SDLT rates. The higher rates will not apply to purchases of caravans, mobile homes or houseboats, or to corporates or funds making significant investments in residential property given the role of this investment in supporting the government’s housing agenda.

The government will consult on the policy detail, including on whether an exemption for corporates and funds owning more than 15 residential properties is appropriate.

The government will use some of the additional tax collected to provide £60 million for communities in England where the impact of second homes is particularly acute.

Further to the announcement we have sought clarification from HMRC as to the treatment of purchasers who have already exchanged contracts to purchase an ARP, or are due to exchange contracts before 1 April 2016, for completion on or after 1 April 2016.  We have received conflicting advice but our current understanding is that purchasers of ARPs who exchanged contracts before 26 November 2015 will avoid the additional 3% SDLT, even if they complete on or after 1 April 2016. Unfortunately it appears that purchasers of ARPs who exchange contracts after 25 November 2015 will be caught by the new rules if they complete on or after 1 April 2016.

It should be noted that the right to apply the lower rates of SDLT will not apply to certain transactions that involve the variation of the contract, assignments of rights and subsales, or which arise from the exercise of certain rights or options. We will therefore be advising purchasers who exchanged before 25 November 2015, and who will complete on or after 1 April 2016, not to assign their contracts or make variations thereto without considering the SDLT implications of doing so.

Please note that these rates could change again if any further budget announcements are made between now and legal completion of your property.  The 15% rate applicable to purchases of residential properties for over £500,000 by “non-natural” persons remains unchanged.

Unfortunately the date for legal completion of “off plan” properties is set by the developer and not us and we will not be in a position to confirm the date for legal completion of individual properties until we are served with notice to complete under the terms of the contract. Any estimate for a completion date given by or on behalf of the developer before notice to complete is served will not be legally binding.

We will continue to monitor the situation and update this section as and when necessary.

Please note that the above is given as guidance only and does not constitute legal advice in relation to any particular matter. Specific advice in respect of SDLT should be sought on a matter by matter basis.