From 1 April 2016, a 3% higher rate of SDLT will apply to purchases of “additional residential properties”. This charge is aimed at those buying residential property for buy-to-let or as second homes. The government states that “some” of the additional tax collected will be used to provide £60 million for communities in England (but presumably not Wales or Northern Ireland, even though property there is also subject to SDLT) “where the impact of second homes is particularly acute”.
We’ve been told that the higher rates will not apply to purchases of caravans, mobile homes or houseboats, or to corporates or funds making significant investments in residential property. The latter exception is, according to the guidance published by HMRC, due to the support such investment gives to the government’s housing agenda.
This higher rate could prove quite tricky to enforce, and there are likely to be a number of circumstances where it shouldn’t apply (for example, those moving within the UK for work who are unable, due to market conditions, to sell their current home). The government has said it will consult on the policy detail, including specifically on whether an exemption for corporates and funds owning more than 15 residential properties is appropriate.
Also, not mentioned in the Chancellor’s speech, but included in the publication from HMRC, is the news that the government intends to open a consultation next year on changes to the SDLT filing and payment process which will come into effect in either 2017 or 2018. This will include a proposal to reduce the filing and payment window from 30 days to 14 days.
The other change announced relates to the timing of capital gains tax payments on gains made on the disposal of residential property. From April 2019, this will be due within 30 days of the completion of the disposal (rather than the end of January in the following tax year as is currently the case).
We have very little detail on this as yet. The government have stated that they will only publish draft legislation for consultation in 2016. However, they have explicitly stated that this change will not affect gains on properties which are not liable to capital gains tax due to private residence relief.