BR Blog: New Stamp Duty Land Tax regime could hit wrong target


Personal tax manager Robert Pullen discusses the new Stamp Duty Land Tax (“SDLT”).

The new SDLT regime effective from 1 April 2016 could have several unexpected consequences. The new regime in force will increase the rate of SDLT payable where the residential property being purchased is an ‘additional property’. This condition is met where ‘at the end of the day of the transaction’ the purchaser has two or more residential properties.
The new rules were originally announced in the Autumn Statement 2015, and a consultation was published in late December. The draft legislation was published last week and the rules remain broadly the same as originally announced, other than the proposal to introduce an exemption for ‘bulk’ purchases (15 properties or more) was not taken forward.
The additional SDLT was one of a package of measures focused on providing low-cost home ownership for first-time buyers and presumably attempts to ‘cool’ the housing market. Whilst the Government’s intention to support first-time buyers is clear, it is too early to say what impact the new additional SDLT will have on the property. Some have speculated that rents could be increased or the latest measures could lead to a ‘fire sale’ amongst buy-to-let investors which could de-stabilise the property market.
What is clear is that this latest significant change to residential property taxation could have several unexpected consequences for individuals who do not appear to be the main target:
  1. Jointly purchased properties are caught where at least one of the purchasers would be treated as owning two or more properties at the end of the day – regardless of the percentage interest they have in the new property.
  1. Parents buying property (or an interest in property) for their children will be caught by the rules where the parents are included on the title deeds. This is a common arrangement where the parents wish to help their children on to the property market for mortgage purposes.
  1. Worldwide properties are included in the definition of residential property, meaning a returning expat purchasing a property in the UK who has not yet sold their home outside the UK would be caught, even though the foreign property has no bearing on UK housing stock.
  1. Inherited properties can generally be ignored when considering if the purchaser has two or more residential properties but there are specific conditions which need to be met.
Parents helping their children would appear to fly in the face of the intention to support first-time buyers. It would have been helpful for the rules to be relaxed in these circumstances, or for additional reliefs to be introduced for genuine first time buyers, regardless of how that property is funded.
Additionally, although a provision exists to prevent the additional SDLT applying where the latest property purchase is for the replacement of the only or main home, the surcharge is still payable if the previous property has not been sold. This creates a major cash-flow problem that could result in individuals having to take high-cost bridging finance whilst they wait for their previous home to be sold and the additional SDLT refunded. 
Whilst the Government are rightly keen to ensure the operation of the additional SDLT is not subject to abuse, there is an argument to re-write this mechanism so that it applies in a less penal manner. If it is the intention for the Government to support first-time buyers onto the property ladder, a re-think is needed to ensure the latest SDLT changes do not have the opposite effect.
For more information, please contact Robert Pullen at