HMRC makes £670m in SDLT surcharge but are changes on the horizon?
Figures out recently show that HMRC has made £670m from the SDLT 3% surcharge since it came in on 1 April 2016. Although some have called on the new Chancellor to scrap the surcharge, it seems unlikely he will do this.
At the time of Budget, HMRC had predicted the surcharge would raise only £630m for the entire tax year April 2016 to April 2017.
An estimate given in HMRC guidance on 16 March 2016 predicted that about 1 in 10 residential property transactions would have to pay the surcharge. The recent figures show that nearly one in four residential transactions have paid the surcharge. For the latest quarter, of the 235,000 transactions, 56,100 paid the extra 3%.
It therefore seems likely that buyers will need to keep applying the surcharge rules and advisers like Blake Morgan will deal with the problems arising, particularly the confusion around the exception from the surcharge for those replacing an only or main residence. See here an article explaining this.
HMRC is expected to issue a Revised Guidance Note shortly. From the draft I have seen it seems the changes will include:
- Clarification on the replacement of the only or main residence exception, providing more examples.
- Information on the granny annex rules which were added during the passage of the Finance Act. See an article on this here.
- Mention (although only briefly it seems) that lease extensions can be caught by the surcharge.
- Clarification on the position where a property is bought in someone’s name but as a mere nominee with the named buyer having no beneficial interest.
One particularly tricky area I am currently exploring is the interaction between the surcharge and multiple dwellings relief, relevant where several properties are bought at once or in linked transactions. This is more common than might be expected, for example housing associations sometimes buy the social housing allocation of a site from a developer, completing the purchase in phases as houses reach “golden brick” (construction work above the foundations and usually above the damp proof course). Housing associations cannot always benefit from a relief from SDLT, there is no exception from the surcharge for them, so the interaction with multiple dwellings relief is important in these transactions.