SDLT revenue figures' review
Recent figures show the level of receipts from Stamp Duty Land Tax. Our SDLT expert John Shallcross takes a look in more detail.
The figures released by HMRC on 21 November 2018 on tax receipts for SDLT receipts for SDLT give some food for thought. The analysis is for the third quarter of 2018 and shows increased receipts from the previous quarter. A total of £2,347m was raised from residential transactions.
Refunds of SDLT 3% following the sale of an old home
Refunds of SDLT were up for the quarter. We are looking here at people who had to pay the extra 3% because they bought their new house before they sold their old one. They were then entitled to apply for a refund when they later sold the old home. It is noted in the commentary that “increased resources” had been allocated to processing repayment claims. As I understand it, staff at an HMRC helpline were spending much time helping people who were calling to enquire why their refunds (being dealt with by another team) were so slow and to chase progress. Whilst the helpline staff could provide information, it was realised that it was better to train some of those staff to handle refund applications themselves. The policy appears to have been successful, with processing times coming right down. The data just released show 8,100 refunds being made in the quarter for a total of £109m.
A welcome change in the Budget was to extend the time limit for applying for a refund in some (but not all) of these cases. The time limit can be as short as three months from completion of the later sale of the old home and some people missed it.
Revenue from the higher rates of SDLT
The proportion of revenue raised from higher rate transactions is high, at 44% (so £1,027m) of all residential SDLT for the quarter, coming from about 24% of the residential transactions liable to tax. About £437m of the tax for the quarter is estimated to represent the 3% surcharge itself. It seems that the higher rates have not had as much effect as expected in discouraging the purchase of additional properties.
We are expecting a consultation paper in January 2019 on a further 1% surcharge for non-resident buyers. This is bound to be complex if the policy announcement is followed closely, adding another layer of difficulty to a system that already confuses many. Would it be too much to hope that one of the options explored would be simplify the higher rates generally? It should not be beyond the wit of the Government to come up with a sensible structure under which the higher rates are paid only by those who are not intending to live in the property they are buying as their only or main home. A system of checks to prevent avoidance should not be difficult to design. I often speak to people who cannot believe that they are required to pay the higher rates even though they are buying a house to live in.
First time buyers’ relief
First time buyers’ relief appears to have been a success, with 58,800 transactions having benefited in the quarter (the relief being worth £142m in the period). That is 21% of residential transactions. The relief was introduced with effect from 22 November 2017 and 180,500 transactions have benefited since then to the end of the quarter. It was slightly extended with retrospective effect by the 29 October 2018 Budget. The change was so as not to rule out those taking shared ownership leases from social landlords where they elected to pay SDLT on the first payment made. Originally the relief in those cases could only be claimed if an election was made to work out the SDLT on the market value of the property. The relief is still only available for properties with a value of up to £500,000 and it still only the first £300,000 that gets relief (so the maximum saving is £5,000).
The relief is relatively straightforward to apply in most places, it does not suffer from the complexities and room for misunderstandings inherent in the higher rate rules. But I have managed to find some unusual first time buyer situations which are analysed here in a paper which has recently been updated.