Stamp Duty

Stamp duty could be lowered by Chancellor

A London estate agency says one of its buyers wants to delay completion until November 1 “just in case stamp duty is changed in October”. Aylesford International director Brendan Roberts says one of his firm’s buyers made the request following speculation that stamp duty could be lowered by Chancellor Sajid Javid.

“Anyone looking to sell is unlikely to conclude a sale much before late October even if they found a buyer early September, so agreeing a delayed completion to allow for any changes in SDLT shouldn’t create too much inconvenience and with buyers thin on the ground it is useful to be flexible and adapt to help buyers commit” explains Roberts.

The move follows widespread speculation by government ministers that stamp duty will be reformed – but without saying when or how. Other agents report alternative tactics pursued by purchasers keen to avoid paying more SDLT than they need – but these raise questions over whether conveyancers would help.

“We have had a pronounced increase in enquiries from clients seeking to utilise the existing ‘mixed use’ stamp duty concession. This concession is still not well understood but can yield dramatic savings on higher value properties” explains Gideon Sumption of Stacks Property Search.

“There is a huge and obvious incentive to look at mixed use property where the maximum rate of SDLT is five per cent. There is no current legal definition but such is the amount of money involved there will almost certainly be some case law soon” Sumption continues.

“The current understanding is that for mixed use SDLT to apply, the property needs to have a commercial element, namely enjoy commercial income from land or buildings that from part of the whole. This could be a self-contained annexe let on an assured shorthold tenancy, some pasture let to a farmer or some buildings let as workshops. What won’t qualify are extensive grounds used purely for the enjoyment of the house.”

Another Stacks agent, Bill Spreckley, says buyers are becoming “more and more aware “ not only about the mixed use option but also how so-called ‘multiple dwellings’ can attract lower SDLT.

“If you buy a property with ‘Multiple Dwellings’ – that is an annexe, cottage or flat – then there are discounts available. One takes the price of the whole property, divide it by the number of properties, work out the SDLT per property and then multiply that figure by the number of properties again” he says. He says a principal property sold with two cottages counting as ‘multiple dwellings’ – each sold at a notional £666,666 – would attract stamp duty of £69,999 but sold as one unit at £2m it would incur SDLT of £153,750.

Are you entitled to a stamp duty rebate

Primas Law is urging landlords and property developers to seek legal advice about potential stamp duty rebates on ‘uninhabitable’ second properties after a landmark tribunal case. A recent ground-breaking case, between P N Bewley Ltd and HMRC, held that properties that are not immediately habitable at the time of completion do not constitute as a “dwelling” for the purpose of the Finance Act 2003.

This finding could have major implications for the UK housing market, according to Primas Law, as the decision meant that P N Bewley was not liable to pay the additional 3% stamp duty surcharge applicable to second homes. It could mean that those who have paid stamp duty on similar uninhabitable properties – including potentially thousands of landlords and developers – may have paid an inappropriate level of tax and could seek to reclaim them.
Consequently, Primas Law is being instructed to act for a large and growing number of landlords and developers seeking to recover stamp duty paid for properties that, potentially, should not have attracted the additional tax.

Daniel Thomas, Head of Litigation at Primas Law, said: “To provide more context to this particular case, the property that P N Bewley purchased was a bungalow and a plot of land in Western-super-Mare.

“The company’s intention was to demolish the bungalow and build a new dwelling on the land with planning permission already being granted. The bungalow was essentially a derelict building that had been unoccupied for around three years.

“The tribunal was provided with photographs of the derelict building and these demonstrated the heating system, radiators, floorboards and pipework had been removed, and that the property – both internally and externally – was in a very poor condition.

“It was also provided with reports from surveyors that concluded asbestos was present in the property and urgently needed removing.”

COMMENT

If you are a developer and are buying property unfit for habitation, then this law could definitely apply, but you may need to use a solicitor who is up to date with property law, as most who simply deal with run of the mill conveyancing may not be aware of this law, or not familiar with the process of appeal, meaning that you could potentially pay out many thousands that you need not pay.


 

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