As a result of soaring UK house prices, more than 4 million homes have been pushed into a higher stamp duty bracket compared to March 2020. David Hannah, Group Chairman of Cornerstone Tax, discusses the top 10 stamp duty reliefs homeowners should consider:
Multiple Dwellings Relief
“First up and most topical is Multiple Dwellings Relief, sometimes called annex relief. This can be covered as if it’s two reliefs. If we start with Multiple Dwellings Relief for homeowners with houses with annexes or cottages in their grounds. A lot of people live in extended families, and we have what’s called an extended family home both metaphorically and literally. As a result, we buy houses that have separate accommodation for our dependent relatives. Because that’s two dwellings, you can get Multiple Dwellings Relief on it. When the 3% surcharge was introduced in 2016, the government had to give a special exemption to annexes and at the same time confirmed they were eligible for multiple dwellings relief. So, on a half-million pound house with no annex, you’d pay £15,000, but on a house with an annexe you’d only pay £5,000. It’s a valuable relief to have. The revenue have been doing a consultation on this as they call it an unfair advantage and will probably be changing this sometime later in 2022 or early 2023.
“The second relief, Multiple Dwellings Relief for developers (which is the same relief, but it applies in a different context) was introduced originally in 2011, to correct a disadvantage that multiple property purchasers encountered. In those days and today if you buy anything in a single bargain or a series of bargains, you have to add everything together and keep calculating tax at a higher rate. What this meant was that when buying multiple apartments or multiple small houses, people ended up paying a higher rate of tax on those houses than they would have done if they bought them individually. It can get the marginal rate of SDLT down as low as 1% which could have a significant impact on your deal. If you’re a corporate acquirer or a larger acquirer you may have to calculate your SDLT three or four different ways to decide which is the best outcome and you might want to seek specialist advice.
Sub-Sale Relief
“At number three is sub-sale relief, mainly aimed at the trade or developer flippers (people who buy land with the intention of flipping it at a profit). If you are in the middle of a simultaneous completion chain, you shouldn’t pay SDLT because you can claim sub-sale relief. If you only sub-sell part, you can claim the relief on the part. There’s a lot of anti-avoidance provisions surrounding it and you need to be careful to make sure you meet those conditions. Generally, it’s popular for land dealers and the land traders.
Additional Release for Residential Property
“The next four reliefs are described as additional release for residential property and they mainly apply to developers and property traders. Property traders is a defined term, meaning a company established for that purpose. Just because you decide to trade a property, it doesn’t necessarily make you eligible for this relief, you have to become a limited company to do so. All four reliefs provide 100% exemption from SDLT if you are buying from the representatives of a deceased estate where they’ve lived in that property. You just have to satisfy yourself that your seller is qualifying. The last one, which is available to property traders and employers is relocation of employment. This depends on the circumstances of the seller not the purchaser. Doing your due diligence on your seller and their circumstances is important. It’s quite valuable if you are picking up a property that is from a decedent’s estate which you’re planning to trade on after giving it a lick of paint, this can save you all of the SDLT.
Anti-Avoidance Provision
“There are actually 49 reliefs from SDLT, but one of the most popular ones we see actually isn’t a relief, it’s an anti-avoidance provision. This deals with transfers to or from partnerships to connected persons. Where a partnership acquires, or is transferred property from a connected person then no SDLT is due. It’s not a claim, it’s a calculation. Companies, other partnerships, members of the family of the partners pensions, trusts and anything that fulfils the definition of connection – it’s amazing how frequently this provision applies. There is a tendency for this to be ignored or isn’t even known about by the conveyancers.
Charities Relief
“The last two reliefs, in terms of popularity are charities relief and housing association relief. We’re seeing a lot of work in the assisted living sector, with attempts to grow socially affordable housing. Many of the private entities that are doing this are charities or holding on trust for charities and they are a hundred percent exempt from SDLT. Similarly registered housing associations are also exempt and it’s important if you are one of those associations that you check your eligibility, because claiming that is going to significantly cut the cost of your investment. It will improve your ability to spend more capital on buying more affordable housing to help solve the UK’s housing prices.”
