UHY Ross Brooke Chartered Accountants

Could you make savings on Stamp Duty Land Tax?

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Phil Kinzett-Evans - Tax Director

Stamp Duty Land Tax (SDLT) is a tax typically paid on the purchase of property or land in the UK; exemptions are available for properties purchased for consideration that is below the threshold. It is important to bear in mind that consideration, for SDLT, includes the amount paid; the assumption of any finance by the purchaser from the seller; and in some transactions can be the full market value of the property (most commonly where the transfer is between a person and their company).

By Phil Kinzett-Evans

There are several ways to make SDLT savings:

  • First-time buyers do not pay SDLT on property costing up to £425,000, but they will pay SDLT at 5% on the portion of purchase price between £425,001 and £625,000. However, if the property price is over £625,000 first-time buyers’ relief cannot be claimed.
  • Where a property is divided into multiple dwellings, for example a property with an annexe, or House in Multiple Occupation (HMO), you may be eligible for Multiple dwellings Relief (MDR) which can result in a lower rate of SDLT.
  • If you have paid the additional dwelling higher rates but have a subsequent sale within three years, then you may be due a refund of the difference between the higher and normal residential rates.
  • If the property is received as a gift or inherited, you may be eligible for SDLT exemption or relief.
  • If your company has bought a residential property that it intends to let out, which is valued at more than £500,000 and so is subject to Annual Tax on Enveloped Dwellings (ATED), you may be able to claim ATED relief in an annual return to reduce the ATED charge potentially to nil. The Relief must be claimed and is not given automatically. Failure to comply with the ATED legislation is heavily penalised.
  • The SDLT rate for commercial properties is usually lower than for residential properties, so it’s important to know that you are paying the correct rates.
  • Relief for non-residents who pay a 2% non-res charge to SDLT and then become resident in the following 12-months… the 2% can be reclaimed: see HMRC website

The good news is that if you accidentally paid too much SDLT, you may be able to claim a refund by submitting an amended SDLT return, or making a claim for overpayment, but this is time sensitive, so if you’re in doubt, take advice from a SDLT specialist as soon as possible. Note that a reduction that relies on a claim being made in a return (for example, Multiple Dwellings’ Relief) cannot be made under overpayment relief timing rules (4 years prior), and is lost. But if you are within 12 months of the original SDLT submission then you can still make a claim.

It’s important to note that the eligibility and the amount of relief you can claim can vary depending on the type of property you are buying and your personal circumstances. There may also be other taxes involved in a transaction and great care should be taken to identify and quantify these before you go ahead, so it’s always best to consult with a specialist Capital Taxes adviser to check your eligibility and guide you through the process.

Do get in touch below if you would like SDLT advice, before, during or after your property purchase.

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