SDLT Budget changes

The Budget 2010 included two announcements relating to SDLT rates – one an immediate change, and one for the future.

The one for the future is the announced new 5% charge to SDLT on residential property purchases where the consideration exceeds £1m. This applies where the effective date of the transaction is on or after 6 April 2011. Attempts to structure property ownership before then in manner that will avoid SDLT will have to take account of the new DOTAS regulations extending the Tax Avoidance Disclosure Regime to require the disclosure of certain Stamp Duty Land Tax schemes relating to residential property with a value of at least £1 million.

The immediate SDLT rate change applies for purchases of residential property for a consideration of up to £250,000. Relief for “first time buyers” is available where the effective date of the transaction is on or after 25 March 2010. The relief runs for two years. Today’s completions can therefore benefit from this relief – enter relief code 28 into box 9 of the SDLT return.

There are, of course, conditions to be satisfied. To claim relief, the taxpayer must be a person who intends to occupy the property as his or her main residence. This therefore excludes purchases by corporate bodies, partnerships or trustees. The purchaser must not, either alone or with others, have previously acquired a major interest in land which includes residential property anywhere in the world. If there are joint buyers, all of the buyers must qualify as first time buyers. The wording of these conditions appears not to include acquisitions by lenders (i.e. corporate bodies) in cases of Islamic finance. However, the HMRC Revenue notes state that Alternative Finance Relief is able to be claimed alongside the new first time buyer's relief, the result of which should be that SDLT payable on a transaction involving alternative finance will be in line with that which would be payable if a property was purchased using a conventional mortgage product.