During last year's Autumn Statement the Chancellor announced that SDLT rates would increase in relation to the purchase of additional residential properties. As with the 2014 Autumn Statement changes to SDLT rates for residential property, it was something of a surprise move.
Transactions falling within the new 'additional dwelling' regime will be subject to rates of SDLT which are 3 per cent. higher than each of the existing residential rates. The policy detail of the new regime is the subject of a public consultation which concluded on 2 February 2016. Accordingly, there is little certainty at this stage in terms of the mechanics of the new rate.
The consultation covers the application of the new rate to a number of areas such as companies, LLPs, joint-venture structures and divorces/separations (amongst others).
From an individual's point-of view, HMRC consider that replacing a main residence ought not to attract the higher rate (at a policy level). However, if the purchase takes place before the sale of the existing main residence and a rental property is owned - the higher rate will be chargeable unless the previous main residence is sold within 18 months (in which case the additional SDLT will be refunded).
Interestingly, HMRC do not envisage a rental property as comprising a main residence for these purposes so if an individual lives in a rental property and also owns a rental property, HMRC's view at this stage is that he will pay the additional rate of SDLT if he decides to purchase a main residence for himself as it will be an additional residential property.
In addition, HMRC are not considering introducing an elective regime for SDLT purposes in relation to main residences as currently exists for CGT purposes.
Although the implementing legislation was not publicly released as part of the consultation, HMRC have stated that the following transitional rules will apply:
The higher rates will not apply to:
- contracts entered into before 26 November 2015 where completion takes place on or after 1 April 2016;
- contracts entered into and substantially performed before 26 November 2015 where completion takes place on or after 1 April 2016;
- contracts entered into before 26 November 2015 where substantial performance or completion takes place between 26 November 2015 and 31 March 2016; and
- contracts entered into between 26 November 2015 and 31 March 2016 where substantial performance or completion takes place on or before 31 March 2016.
Obviously, it will be the legislation itself that dictates how and when the additional SDLT rate will be imposed and this is an area Wedlake Bell is following very closely.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.