Yesterday at the Budget draft legislation was produced finalising the structure of the 3% SDLT surcharge.
As expected, the higher SDLT rates will not apply to a single purchaser where “at the end of the day of the transaction” that person owns only one residential property. This is regardless of whether that property was purchased as a residence for the buyer or as a buy to let. The higher SDLT rates will also not apply where the sole purchaser is buying a property to replace his main residence, even if that purchaser owns other property.
One area the legislation addresses which was unclear in the initial consultation paper is what happens where, treated on their own, one of the joint purchasers would escape the charge, but the other does not? Would that acquisition be caught by the additional 3% SDLT rate and, if so, could the price be apportioned between the joint purchasers and the extra 3% surcharge only charged on the one whose circumstances did not fall outside the 3% rules?
It is now clear that to escape the additional 3% SDLT charge all purchasers must satisfy the criteria set out above for single purchasers. There is also to be no apportionment. This will have wide spread impact on purchasers since spouses are to be treated as being joint buyers even if only one of them is buying. For example if the husband buys a property to rent out in his sole name (having not owned a property or having an interest in another property) the wife would be treated as being a joint purchaser and if she either owns a property or has an interest in another property the additional SDLT rates will apply to the husband’s acquisition. Similar rules apply to civil partners.
There are also risks for parents where property is held on a bare trust or a trust in possession for minors. The minor’s interest will be treated as being owned by the parent or parents and may cause issues when that parent buys a property. He or she will be deemed to have an interest in the child’s property and the new property will trigger off the higher SDLT rates if the property being acquired by the parent is not one that replaces the main residence. If the parent is married the spouse rules referred to above will also apply. These rules do not apply to discretionary trusts in the same way.
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