SDLT: Potential Changes Following HMRC Consultation
What's on the horizon?
Posted by Helen Beaumont on 22/03/2023 @ 8:00AM
Although the recent Spring Budget didn't include any Stamp Duty Land Tax (SDLT) announcements, I wanted to take a look at the potential changes on the horizon, following a consultation by HM Revenue & Customs (HMRC) ...
HMRC has conducted an SDLT consultation to examine potential changes to legislation governing mixed-use properties!
As there were no significant SDLT updates in the Chancellor's statement, it seems the government is satisfied with the current regulations and tax bands, but here's a brief history of SDLT adjustments:
In September 2022, the nil-rate threshold for SDLT on residential property purchases in England and Northern Ireland was raised from £125,000 to £250,000
The nil-rate threshold for first-time buyers was increased from £300,000 to £425,000
Scotland and Wales have devolved powers to set their equivalent tax rates: Land & Buildings Transaction Tax (LBTT) in Scotland and Land Transaction Tax (LTT) in Wales
The maximum purchase price for claiming first-time buyers' relief rose from £500,000 to £625,000
These adjustments are temporary and will be reassessed after 31 March 2025
In 2022, HMRC conducted a consultation to examine potential changes to legislation governing mixed-use properties. The existing rules dictate that residential properties use residential SDLT rates, while commercial properties apply non-residential rates. Mixed-use properties, however, currently benefit from the non-residential rates, often resulting in a tax advantage for buyers
Considering the frequency of tribunal cases assessing the classification of mixed-use properties, HMRC proposed two options:
Separate the residential and non-residential elements of a property. For example, a shop with a flat above would currently qualify as mixed-use, but under this proposal, the property would be subject to both residential and non-residential rates. This method could lead to errors or uncertainty, as buyers would need to accurately apportion a property, taking into account factors such as communal spaces and exterior facilities.
The government would establish a threshold to determine whether a property is classified as commercial/non-residential or residential. The threshold requires careful consideration to avoid unintended consequences.
However, there are some challenges with the consultation proposals because if the threshold is set too high, it may not capture properties like a high-street shop with a flat above. Additionally, if it's set too low, buyers could be tempted to link transactions, purchasing a large residential property alongside a small, unrelated commercial property to take advantage of the mixed-use classification.
Although the industry had hoped for an update in the Spring Budget, HMRC has yet to announce the results of the consultation. It is anticipated that they will implement the findings at a later date!
In summary, there were no SDLT announcements were made in the Spring Budget, but HMRC held a consultation in 2022, considering changes to the treatment of mixed-use properties. Two options were proposed: an apportionment method and a threshold-based approach and now the industry is awaiting HMRC's decision on the consultation outcomes.
It will be very interesting to see what comes out of it.
Until next time ...
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more about SDLT and any potential future changes, it may be a great idea to give me a call on 01908 774323 and let's see how I can help you.
Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.
No unauthorised use, duplication, distribution or modification to any original content contained within this blog is permitted without prior written permission of the author. All other trademarks and registered names are acknowledged.