The Chancellor, Philip Hammond’s first Autumn Budget saw the headlines captured by his stamp duty exemption for first-time buyers. Whilst this is great news for anyone thinking of buying a first-time property up to a value of £500K (the first £300K being exempt and the next £200K changed at 5%), it is yet a further change to the already complex and ever evolving Stamp Duty Land Tax (SDLT) code.
Since its introduction in the Finance Act 2003, SDLT has gone through numerous overhauls, with complex changes introduced to deal with situations not provided for by the original 2003 legislation. Some of these changes have been introduced to prevent tax avoidance, others to plug gaps in the legislation and some for political purposes.
It is the political impact of SDLT, that has driven many recent changes, with successive governments using it to achieve (or at least seek to achieve) some sort of policy objective. For example, the dislike of high valued properties being held in companies (often Offshore) and subsequently sold by way of company share sale (attracting stamp duty on shares of zero- 0.5% rather than full SDLT on the property), resulted in the complex new SDLT rules that apply where corporates purchase residential property (not to mention the Annual Tax on Enveloped Dwellings (ATED) and ATED-related Capital Gains Tax).
Former Chancellor, George Osbourne, tried to ‘slow’ the top-end of the property market and free up the lower end with an additional 3% SDLT on top of standard rates for buyers who purchase additional properties. This policy sought to target the buy-to-let landlord market in an attempt to make more properties available for first time buyers struggling against a housing shortage. It is debatable whether such SDLT changes had a positive impact on the housing issue, but certainly they achieved the other objective of increasing the tax take for the Exchequer.
The latest stamp duty policy exempting certain first time buyers from charge is no doubt hoped to be a vote winner by the Government, who must be more than slightly concerned with how graduate/first time buyer voters seemed drawn to the left of the political spectrum in the last General Election, by a Labour campaign that seemed to strike a chord on issues such as tuition fees and student debt.
For as long as the ability to own a property in Britain is a core aspiration of both British and overseas purchasers, the ability to slow down and speed up that process with stamp duty measures, will be a common political policy.
So, where does this leave the lawyers who are responsible for keeping up with these changes when transacting the property purchases? Gone are the days when Property Lawyers could get by with a working knowledge of the SDLT basics, such that a commercial or residential transaction could be identified and the appropriate tax calculated.
Recent changes in particular to the ‘Additional Properties’ rules are highly complex and cover a large range of unusual transactions and deal variations. For example, rules for joint purchasers of additional property, married couples, those replacing main residences, property inherited, the list goes on. Equally, this latest exemption for first time buyers, although not as complex as the abovementioned rules for additional properties, will have its quirks, and grey areas of application.
Property Lawyers are therefore under even more pressure to investigate and due diligence the background to property transactions to elicit all accurate facts in order to correctly apply the SDLT rules and reliefs.
Winslows Tax Law offers property lawyers specialist tax support to ensure they stay well equipped to meet the challenges of an ever changing stamp duty code. www.winslows.co.uk Contact [email protected] for further details