In the 2015 Autumn Statement, George Osborne announced higher rates of stamp duty on the purchase of additional properties, such as buy-to-lets and second homes. The government is currently consulting on the practicalities of how the 3% stamp duty hike will work and is seeking responses from conveyancers. The deadline for the consultation is 1st February 2016 in order for the government to announce the new regime in the upcoming Budget.
Conveyancing lawyers are asked to respond to the following questions:
- Do you think that purchasers are more likely to give accurate answers to main residence questions if HMRC provides specific questions for the conveyancer to ask the purchaser?
- Would a formal declaration by the purchaser that the answers to any such questions are accurate help to increase compliance without creating undue burdens for conveyancers? How do you think such a declaration should work?
- Besides normal publicly available guidance, are there any additional products that HMRC can provide to help purchasers understand what rates of tax they will be paying on a planned purchase?
In order to administer and ensure compliance with the new higher rates, changes will be required to the existing SDLT return.
Taxpayers will have to specify that a given transaction is for an additional residential property. This will leave the SDLT return with four categories of property: residential property, non-residential property, mixed, and residential – additional property.
The government recognises that the higher rates of SDLT will create additional requirements for agents acting for purchasers. The government expects most of the additional information that needs to be obtained from purchasers will be straightforward and uncontroversial.
For example, questions about whether the purchaser (or any joint purchaser) will own more than one residential property at the end of the day of the transaction will need to be considered. This information will need to be kept up to date by the purchaser and the conveyancer during the period between instruction and completion.
One piece of information which will be required from purchasers is whether any newly purchased residential property will be a main residence and replacing a previous main residence. This would be required in a situation where a purchaser with multiple properties at the end of the day of a transaction would not pay the higher rates.
In order to determine this, agents will need to determine whether the purchaser has disposed of any residential property within 18 months of the new transaction and whether or not that disposal was a disposal of the purchaser’s only or main residence.
Ultimate responsibility for the accuracy of an SDLT return remains with the purchaser and HMRC will provide guidance on how purchasers can determine whether the disposal of a property can be considered as a disposal of a main residence. Yet these days many law firms complete the return forms on behalf of clients. Is that set to continue given the additional complexity and risk?
Conveyancers may not be best placed to judge whether a purchaser is correct about which property has been their main home. The government recognises that conveyancers are a key part of ensuring SDLT compliance and are keen to maintain this.
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