Cornerstone Tax provides their insight into Top Ten Stamp Duty Reliefs

Cornerstone Tax provides their insight into Top Ten Stamp Duty Reliefs as a guide through the complexity of Stamp Duty Land Tax.

You may have noticed lately the increasingly frequency with which the complexity of Stamp Duty Land Tax is mentioned.

The Chancellor’s ‘holiday’ on the tax in 2020 brought it forward into the public consciousness in a way that it seldom is, and recently increasing numbers of clients are bringing claims against firms for missed reliefs. With PII premiums on the rise (over 30% on average in the last quarter of 2021) and the SRA looking at raising the limits on fines it can impose, firms can ill afford the reputational or financial damage that may arise from such claims.

Awareness is key, so here is a brief overview of the ten most common reliefs which you might find are relevant to more transactions than you think:

1. Multiple Dwellings Relief – Developers

MDR was introduced in 2011, mainly to correct what 3was perceived to be a disadvantage to investors in property, namely the large SDLT bill which could result when purchasing multiple smaller properties as part of one transaction.

A block of flats or a selection of small houses in the same area could result in an SDLT liability more reflective of a stately home. In order to counter this, and encourage investment in the property sector, MDR was introduced, averaging out the prices of all properties acquired in a single transaction in order to calculate the SDLT liability on each one based on that average.

Whenever you are dealing with an investor/developer client purchasing multiple properties in the same transaction, the availability of MDR should be one of your key considerations.

2. Multiple Dwellings Relief – Residential

With the rising cost of living, an ageing population and a lack of care facilities in the U.K., multi-generational homes are becoming increasingly common. Whether it’s a property with a self-contained ‘annexe’ for elderly parents or even older children, or a larger property with a separate property/ies in the grounds, these types of purchase may also be subject to MDR.

Indeed, a large number of the claims against firms in recent months are for just these types of property, where MDR was not considered, to the detriment of the client.

3. Sub-Sale Relief – Investors

Sub-Sale relief has a somewhat tarnished image in recent years, having been the subject of so much anti-avoidance discourse from HMRC, and this can serve to distract from its genuinely intended purpose.

Those investors looking to ‘flip’ property – usually land or derelict properties for development purposes – are perfectly eligible to claim this relief in the appropriate circumstances, which could see them paying zero SDLT on their part in the transaction.

4. Traders Relief – Buying from the representatives of an Estate

When dealing with property which has been lived in by the deceased and is being purchased from the representatives of their estate, there is 100% relief available to Property Traders on the SDLT that would otherwise fall due.

Note that Property Trader for the purposes of this relief and the other relevant reliefs in this list is a strictly defined term, and you and your client should make absolutely certain they fall into this category before claiming this or any other relevant relief, as well as ascertaining that the seller is also qualifying for these purposes.

5. Traders Relief – Chain Break Relief

If a property trader steps in to restore a property chain which has been broken, 100% relief of SDLT may be available to that trader.

The qualifying status of the seller must be established in order to take advantage of this relief.

6. Traders Relief – Part Exchange Properties

Where a Property Trader purchases a part exchanged property from a seller who is buying a new home from a housebuilder, 100% relief on SDLT may be available.

This may be applicable whether your client is the housebuilder in question or a property trader, but you must satisfy yourself that the seller is qualifying for the purposes of claiming this relief.

7. Traders Relief – Employment Relocation

Where an employee is relocating for the purposes of their job, and their employer purchases their home as part of that move, 100% relief on the SDLT is available, and can apply either to the employer themselves or to a qualifying property trader acquiring the property.

Once again, the qualifying nature of the seller must be established to take advantage of this relief.

8. Anti-Avoidance – Transfers between partnerships and connected persons

Not actually a relief per se, merely a feature of the anti-avoidance provisions which serves, in the appropriate circumstances to mitigate SDLT liability in its entirety.

Where a property transfer takes place either to or from a partnership involving connected persons, SDLT liability is zero.

One example is the transfer of a commercial premises of a company into the pension scheme of the company itself. Many such transfers are made, and in our experience legal advisers have often missed that these transactions qualify as zero SDLT transfers.

9. Charities Relief

As the assisted living sector continues to grow, Charities relief is becoming more relevant to the property market.

Where a qualifying charity is purchasing a property, or a purchase is being made to hold on trust for a charity, the acquisition is 100% exempt from SDLT.

10. Housing Association Relief

Similarly to the above, registered and qualifying Housing Associations also benefit from a 100% exemption on SDLT for their acquisitions.

This is especially important as with the current housing crisis, the kinds of savings this could result in will mean Housing Associations having more capital available to invest in acquiring more properties, significantly impacting their ability to provide housing to those who need it the most.

In total, there are 49 different reliefs, exceptions and exemptions which apply to SDLT, and these are merely the most commonly applicable, and therefore the ones to be most aware of. In reality, property lawyers should not have to also be tax advisers for their clients, but no amount of disclaimers in your terms of business will deflect the responsibility your clients feel rests with your firm in the event that a relief is missed, and they find themselves thousands of pounds out of pocket. Now more than ever, it pays to be aware.

Kindly shared by Cornerstone Tax

Main article photo courtesy of Pixabay