Many readers will be aware of the changes that were announced in the 2015 Autumn Statement regarding higher rates of Stamp Duty Land Tax (SDLT) for purchasers of “additional properties”. In short, the purchase of any new buy-to-let properties or second homes from 1 April 2016 will attract an additional 3% SDLT charge on top the usual prevailing rate.
Many of our smaller developer clients have asked about the effect that this will have on their purchases of residential properties, even if the intention is that the property is demolished or substantially refurbished and then immediately sold on.
The short answer is that it appears to be the current intention of the Treasury that the higher rates of SDLT will apply to a large number of the types of transactions that Ashworths undertakes. The Government have published a consultation paper where they invite comments on the circumstances where purchasers (be they individual investors or “non-natural persons”) are exempt from the higher levels of SDLT.
Be aware, that the intention of the Treasury is to make those exemptions as tight and restricted as possible. The Treasury is of the view, which is mistaken in our view, that many of our clients are competing against first-time buyers for properties which is why it is equitable for them to pay the higher rate of tax. Whilst the Government does acknowledge that smaller investors/developers do make a contribution to the economy, they seem to be gearing themselves up to setting a minimum threshold of 15 units of residential accommodation before a purchaser is deemed to be making a sufficiently important contribution to the economy to justify an exemption from the higher rates.
We urge anyone with an interest in this topic to spend a few moments to read the Treasury’s Consultation document:
Of particular importance is section 2.19 of that document and the four questions that are posed:
Do you agree that an exemption should be available to individual investors as well as all non-natural persons? Alternatively, is there evidence to suggest any exemption should be limited to only certain types of purchaser? If so, which types of purchaser?
Do you think that either the bulk purchase of at least 15 residential properties or a portfolio test where a purchaser must own at least 15 residential properties are appropriate criteria for the exemption? Which would be better targeted?
Are there better alternative or additional tests that could be used to better target an exemption and fulfil the government’s wider housing objectives?
Are there any other issues or factors the government should take into account in designing an exemption from the higher rates?
We perceive that the Treasury’s ultimate decision on these points will be of vital importance to many of our clients. The consultation closes on 1 February 2016, so there is not much time to make your representations.