Autumn Statement 2014 – Stamp Duty Land Tax Reform Update

23rd December 2014

At the Autumn Statement on 3rd December 2014, the Chancellor of the Exchequer announced a reform of how Stamp Duty Land Tax (SDLT) is calculated for residential property purchases which complete on or after 4th December 2014.

Where contracts have been exchanged before 4th December but complete on or after that date, the purchaser has an option to choose whether to pay tax under the old or the new rules, subject to further details.

These changes are not intended to affect non-residential property, enveloped property or the charge on rent. Non-residential property includes: commercial property such as shops or offices; agricultural land; forests; any other land or property which is not used as a dwelling; six or more residential properties bought in a single transaction; and mixed use property that incorporates residential and non-residential elements.

However, George F. White understand that at the time of writing there is no clear definition of how a ‘mixed use property’ with a high value residential and a relatively small non-residential element will be treated. How such a property is treated or values apportioned could impact significantly on the SDLT payable. If you find yourself in this situation you have the following possible options:

– Let HMRC Investigate; Provide HMRC with specific details of the property at the SDLT Head Office and receive their advice on treatment.

– Complete Self-Assessment; There is no definition of a required percentage split between residential and non-residential elements of the same purchase to put a property in either bracket. The purchaser could submit an SDLT return at a lower non-residential rate on this basis. There may however be a challenge from HMRC / the District Valuer.

– Apportionment; HMRC may apportion the separate elements of the property and charge SDLT to each part separately. If this route is taken, accurate valuation advice will be essential.

Please refer to the tables below for example rates.

New Rates – Residential Property

Purchase price of property

Rate paid on part of price within each band

Up to £125,000

0%

Over £125,000 and up to £250,000

2%

Over £250,000 and up to £925,000

5%

Over £925,00 and up to £1,500,000

10%

Over £1,500,000

12%

£450,000 residential property example:

SDLT due

0% on the first £125,000 =

£0

2% on the next £125,000 =

£2,500

5% on the final £200,000 =

£10,000

Total SDLT due =

£12,500

£1,250,000 residential property example:

0% on the first £125,000 =

£0

2% on the next £125,000 =

£2,500

5% on the next £675,000 =

£33,750

10% on the final £325,000 =

£32,500

Total SDLT due =

£68,750

Old Rates – Residential Property

Purchase Price

Rate

Up to £125,000

0%

Over £125,000 and up to £250,000

1%

Over £250,000 and up to £500,000

3%

Over £500,000 and up to £1 million

4%

Over £1 million and up to £2 million

5%

Over £2 million

7%

£450,000 residential property example:

£450,000 x 3% = £13,500

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