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UK Consults On Stamp Duty Land Tax Reforms

by Robert Lee, Tax-News.com, London

30 December 2015


The UK Government has launched a consultation on plans to introduce higher rates of stamp duty land tax (SDLT) for purchases of second properties.

In his foreword to the consultation document, David Gauke, Financial Secretary to the Treasury, said: "The higher rates will be three percentage points above the current SDLT rates, and will take effect from April 1, 2016. The Government will use some of the additional tax collected to provide GBP60m (USD88.9m) for communities in England where the impact of second homes is particularly acute."

"The tax receipts will help towards doubling the affordable housing budget. This will help first time buyers and is part of the Government's commitment to supporting home ownership."

The higher rates will only apply to the purchase of additional residential properties that cost more than GBP40,000 in England, Wales, and Northern Ireland on or after April 1, 2016. They will be charged on the portion of the value of the property that falls into each SDLT band.

The first GBP125,000 of the property price is exempt from stamp duty. A rate of two percent is payable on the portion up to GBP250,000, five percent on the portion up to GBP925,000, ten percent up to GBP1.5m, and 12 percent on the value above GBP1.5m.

The Government estimates that around 90 percent of residential property transactions will not pay the higher rates. According to the consultation, "if at the end of the day of the transaction an individual purchaser owns two or more residential properties, whether the purchaser pays the higher rates or not will depend on whether they are replacing their main residence."

The consultation also explained that married couples and civil partners who own one property at the end of the day of the transaction will not pay the higher rates of SDLT. "However, if either of them owns more than one residential property they may pay the higher rates when purchasing another property. The Government will treat married couples and civil partners living together as one unit," it said.

As a result, married couples and civil partners may own one main residence between them at any one time for the purposes of the higher rates, and property owned by either partner (and any minor children) will be relevant when determining if an additional property is being purchased or not.

Where multiple residential properties are purchased in a single or linked transaction, that transaction is eligible for multiple dwellings relief (MDR). Under MDR, the residential rates of SDLT are applied to the average price of each property. The Government intends to retain this system for the purchase of multiple residential properties. It is seeking views on whether there should be an exemption from the higher rates targeted at the "bulk" purchase of at least 15 residential properties.

The consultation will close on February 1, 2016. The Government will confirm the final design of the new regime at the Budget on March 16 and the higher rates will apply from April 1.

TAGS: tax | budget | United Kingdom | tax thresholds | ministry of finance | tax authority | tax rates | stamp duty | tax reform

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