Stamp Duty Land Tax (SDLT): Q&A

Hillier Hopkins LLP

Chartered Accountants & Tax Advisers

Call +44 (0)330 024 3200 and discover how we can help you.

The questions below relate to the purchase of residential properties by individuals and are ones we answer on a daily basis.

Q: “I have been contacted about a scheme which can reduce my SDLT liability….”
A:  There are a number of companies offering schemes, arrangements or the like to purchasers. The scheme providers provide substantial information to evidence that the arrangement is in line with the legislation and their own insurance policy to cover purchasers if HMRC were to enquire.

Our experience of these scheme are woeful as once HMRC are aware, the providers  can often disappear leaving purchasers to fund the liability, penalties and interest charges (and of course the fees paid to the promoters).

We do not recommend, endorse or advise purchasers enter into any type of scheme or arrangement. Our rule of thumb is, if it seems too good to be true, it usually is.

Q: “Can my parents help with the mortgage?”
A: House price increases have meant that it is increasingly harder for young people and first time buyers to get on the property ladder. In order to access realistic mortgages, parents are assisting their children with purchases.

If the deposit and/or other funds are gifted to a child and the parents do not have any right to the property (i.e. they are not on the title deed or mortgage agreement), the assistance will not trigger the 3% surcharge.

If parents have a share in the property, it is likely the 3% surcharge will be due on the whole purchase as their other property interests will count against them. There may be exceptions – please contact us for details.

Q: “Will I be subject to the 3% surcharge if I increase my own share in my property?”
A: This is known as stair-casing.

If the purchaser is entitled to 25% or more interest in the property and it is the purchasers only or main residence over a three year period before the change, the 3% surcharge is not due.

Hence, if the interest is in a buy-to-let property the 3% surcharge may be due.

There are special rules for spouse transfers, please contact us if you have a specific question in this area.

Q: “I inherited a share in my parent’s property a couple of years ago, now I am buying a home to live in, will I be subject to the 3% surcharge?”
A: No SDLT is due on inherited properties, however, it can potentially impact a purchaser’s position in the future.

If the inherited share was 50% or less and it occurred within three years of purchasing an interest in a main residence, the 3% surcharge will not apply.

If the in inherited share was more than 50% or more than three years ago, the 3% surcharge may apply. However, depending on the circumstances the purchase may meet the replacement of a main residence condition.

Please contact us if you have a specific question in this area.

Q: “Is SDLT due if I extend the lease of my leasehold flat?”
A: If the premium exceeds more than £40,000 the standard residential rates will apply. In addition, if the flat is a purchaser’s main or only residence, throughout the three year period leading up to the extension, the 3% surcharge will not apply.

If the flat is a buy-to-let and the premium is £40,000 or more the 3% surcharge may apply.

Q: “I am living in rented accommodation and own a share in flat, why will the 3% surcharge apply when I am buying a main residence?”
A: The 3% surcharge applies to the purchase of additional properties for more than £40,000.

If the share in the flat is more than £40,000 then the 3% surcharge will apply. Although the purchaser is buying a main residence, the interest in the flat counts against them, hence the purchase is for an additional property.

An exemption from the 3% surcharge is available if a purchaser is replacing a main residence, however, to meet this exemption a purchaser must have disposed of a main residence within certain time limits. Unfortunately, moving from rented accommodation does not count as a disposal and the 3% surcharge is applicable.

If you have any concerns please contact Simon Cyna on or +44(0)192 363 4258

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