A response to the Consultation on Higher Rates of Stamp Duty Land Tax

A response to the Consultation on Higher Rates of Stamp Duty Land Tax

22:26 PM, 30th December 2015, About 6 years ago 13

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stampI wish to make the following comments on the consultation on ‘Higher rates of Stamp Duty Land Tax (SDLT) on purchases of additional residential properties’.

My first point is a general one. The Government says that it is committed to accelerating housing supply and wants to see more homes built. This policy on higher rates of SDLT will, like the Government’s policy on restricting finance cost relief for individual landlords, be a disincentive to investment in housing and will have a negative impact on housing supply.

In relation to question 2, I do not agree that the Government’s proposal for joint purchases is appropriate. In particular, where a parent is helping a child get on the housing ladder by purchasing jointly, I believe such transactions should be exempt from the higher rates of SDLT. Such transactions assist first time buyers and should be encouraged, not discouraged.

In relation to question 11, I do not agree with the Government’s proposed treatment of furnished holiday lets as these type of properties make an important contribution to local economies. My proposal is that the sale of an existing furnished holiday to a purchaser who continues to use the property as a furnished holiday let should not attract the higher rates of SDLT. My reasoning for this is because the transaction does not reduce the supply of owner occupied houses.

In relation to question 12, I have a number of proposals for the Government to consider.

  • Firstly, if a property is not suitable for mortgage purposes, the purchase of such properties should not attract the higher rates of SDLT as such properties are unlikely to appeal to first time buyers. Such properties are usually targeted by property trading companies or by buy to let investors who have the experience and financial resources to bring the properties back into use. This type of investment in housing should be encouraged, not discouraged by higher rates of SDLT.
  • Secondly, if a property has been on the market for 6 months or more, the purchase of the property as an additional purchase should be exempt from the higher rates of SDLT. In such cases, first time buyers have had ample opportunity to make an offer. If there is only interest in a property from property trading companies and/or buy to let investors, it is in the interests of the seller to get a sale. Applying the higher SDLT rates in such circumstances, could result in the sale not concluding. It is better to have churn in the housing market, than have properties remaining unsold for long periods.
  • Thirdly, the current proposal disadvantages existing landlords who may wish to restructure their portfolios. This is because selling to a company would attract higher rates of SDLT. I propose that if a property is owned by an individual in their own name and the property is being purchased by a company owned by that same individual, such transactions should be exempt from the higher rates of SDLT because such transactions will not reduce the supply of owner occupied houses.
  • Fourthly, I wish to propose that if a property is already a buy to let property, the sale of the property to a buy to let investor should be exempt from the higher rates of SDLT because such transactions will not reduce the supply of owner occupied houses. In particular, HMO properties being sold to another landlords should be exempt as these types of properties are not suitable for first time buyers.
  • Fifthly, it appears that the Government has not considered the impact on property trading companies. Such companies buy derelict and run down properties, refurbish and improve them and then sell them for a profit. Sometimes these sales will be to first time buyers. Such activity should be encouraged as it brings empty homes back in to use and improves the quality of the housing stock. Applying the higher rates of SDLT to such activity will be a disincentive and will reduce investment in housing at a time when the Government has acknowledged that there is a need to increase supply.

My overall impression of the consultation published by the Government is that it seeks to favour large scale investors over small scale investors. I believe that the Government’s overall aim of accelerating housing supply would be better achieved if it also incentivised small scale investors to invest in housing. The cumulative contribution from small scale property businesses to housing supply should be acknowledged by the Government and encouraged.

In relation to question 13, I believe that an exemption should be available to individual investors with an existing residential property portfolio of at least 15 properties at the time of a transaction. This would recognise the contribution that such individual investors make as housing providers to the thousands of people who choose to, or must, rent privately. Non-natural persons with at least 15 properties at the time of a transaction should also be exempt as should the bulk purchase of at least 15 residential properties. These exemptions will help accelerate housing supply.

In general, there is a need for greater consistency in the Government’s approach to housing providers with regard to SDLT and other taxes. For example, if property companies with 15 or more properties can fully offset their finance costs against their profit, why can this also not apply to individual landlords with 15 or more properties?

To conclude, I believe that there is a risk that the Government’s proposals will reduce investment in housing and will result in a stagnated housing market. The proposals I have put forward are aimed at avoiding such stagnation and accelerating housing supply.


by Joe Bloggs

18:18 PM, 5th January 2016, About 6 years ago

Reply to the comment left by "Barbara " at "05/01/2016 - 18:07":

'Joe. The difference is that I own a residential property that I live in. My son is on the deeds with me of a one-bed BTL flat and under the terms of the BTL mortgage he cannot live in it so he rents.'


by Michael Barnes

19:42 PM, 5th January 2016, About 6 years ago

Reply to the comment left by "Joe Bloggs" at "05/01/2016 - 18:18":

The government proposal is "if you sell your main residence and buy another main residence in the next 18 months, then you do not pay the additional SDLT".
Also "if you own (or part-own) a property already, then any subsequent property in which you buy a share will attract additional SDLT".

by Simon Lever

12:12 PM, 11th January 2016, About 6 years ago

Reply to the comment left by "Michael Barnes" at "05/01/2016 - 19:42":

Michael - sorry to say but that is not quite correct.

There is more clarification of the 3% charge given in an AccountingWeb article here

An extract regarding buying and selling of your main residence is as follows:

"If the main residence hasn’t been sold before the new main home is acquired the 3% supplement must be paid on the purchase of the new property. However, where the former home is sold up to 18 months after the new acquisition, the SDLT supplement can be reclaimed. If it takes more than 18 months to sell the former home - no SDLT refund will be due. The consultation asks whether this pay-now, reclaim later policy would cause hardship or practical problems – respond by 1 February to have your views heard. (link to consultation on their web site)

The main residence for SDLT purposes will be the actual main residence based on the facts of occupation, not the home that the owner has elected to be treated as their main residence for CGT purposes. This is recipe for confusion. The CGT election for main residence is there for a reason, but it will be ignored for the purposes of the SDLT supplement.

Married couples and civil partners will be treated as having only one main residence between them, but unmarried couples can have one main residence each. Thus an unmarried couple will be able to own a property each (not held jointly), before they become liable to pay the 3% SDLT supplement on the next property purchase."

In my opinion this is a recipe fro confusion and overpaymet of tax which is not needed.

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