New reliefs from Annual Tax on Enveloped Dwellings and Stamp Duty Land Tax for housing co-operatives
Published 21 July 2020
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Who is likely to be affected
Housing co-operatives that acquire and own residential property in the UK, valued at more than £500,000 for the purposes of Annual Tax on Enveloped Dwellings (ATED).
Housing co-operatives that acquire residential property valued at more than £500,000 in England and Northern Ireland, for the purposes of Stamp Duty Land Tax (SDLT).
General description of the measure
The measure will provide relief from the charge to ATED and the 15% flat rate of SDLT for housing co-operatives.
Policy objective
This measure is intended to relieve non-publicly funded, non-social housing co-operatives which have no transferable share capital from these charges. The absence of transferable share capital eliminates the potential avoidance of SDLT which both ATED and the 15% flat rate of SDLT were designed to counter.
Background to the measure
ATED and 15% flat rate of SDLT are charged on companies, partnerships with any company members and collective investment schemes which acquire and own an interest in UK residential property. The 15% rate of SDLT is charged on acquisition of residential property located in England and Northern Ireland by such entities where the value of that property is more than £500,000. ATED is charged annually on the ownership of UK residential property valued in excess of £500,000 held by such entities.
Both taxes include a number of reliefs and exemptions aimed at certain types of ownership or use of a property (for example property rental businesses, registered providers of social housing, charities owning property for charitable purposes).
Some types of housing co-operatives, such as those which are not registered providers of social housing, do not currently qualify for a relief. At the Spring Budget 2020, the government announced that it would introduce legislation in Finance Bill 2020 to 2021 so that relief will be available to housing co-operatives.
Detailed proposal
Operative date
This measure will come into effect retrospectively from 1 April 2020 for ATED, as well as allowing eligible housing co-operatives to claim an ATED refund for the 2020 to 2021 chargeable period.
For 15% flat rate of SDLT the measure will come into effect for transactions with an effective date (usually the date of completion) on or after Autumn Budget Day 2020 for residential properties located in England and Northern Ireland.
Current law
Sections 132 to 150 of Finance Act 2013 (FA 2013) make provision for reliefs from ATED.
Similarly paragraphs 5 to 5K Schedule 4A Finance Act 2003 (FA 2003) make provision for reliefs from 15% SDLT and for withdrawal of the relief in certain circumstances
Proposed revisions
Legislation will be introduced in Finance Bill 2021 to 2022 to amend FA 2003 and FA 2013 to introduce new reliefs from both ATED and the 15% flat rate of SDLT.
New Section 150A is inserted into FA 2013 to provide relief from ATED for qualifying housing co-operatives. In summary, a ‘qualifying housing co-operative’ is one which falls within the meaning of the Housing Associations Act 1985, is registered by the Financial Conduct Authority (FCA) under the Co-operative and Community Benefit Societies Act 2014 and has rules which, amongst other things, prevent members from transferring their membership/share capital.
Equivalent provisions apply in relation to housing co-operatives located in Northern Ireland, where a ‘qualifying housing co-operative’ is one which falls within the meaning of the Housing (Northern Ireland) Order 1992 and is registered by the FCA under the Co-operative and Community Benefit Societies Act (Northern Ireland) 1969.
Similar new insertions are made into Schedule 4A of FA 2003: new paragraph 5FA provides relief from the 15% rate of SDLT for qualifying housing co-operatives and new paragraph 5L withdraws the relief if, within a period of 3 years, the conditions are no longer met.
There are also further consequential amendments for section 81, 85, 86 and 86 of FA 2003.
Summary of impacts
Exchequer impact (£ million)
| 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 |
|---|---|---|---|---|---|
| - | - | negligible | negligible | negligible | negligible |
This measure is expected to have a negligible impact on the Exchequer.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
This measure is not expected to have any direct impact on individuals as ATED and 15% SDLT are charged on companies, partnerships with company members, and collective investment schemes.
However, this measure is expected to have an indirect positive impact on individuals who are members within a housing co-operative. This measure will decrease the upfront cost of purchasing a property for housing cooperatives, as well as decreasing the rent tenants must pay to cover the additional taxes.
Customer experience is expected to remain broadly the same as it does not change how individuals interact with HMRC.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that there will be any impacts on those groups sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on the small percentage of the total population of approximately 300 non-publicly funded, non-registered provider housing co-operatives. The measure will provide relief from the charge to ATED and the 15% flat rate of SDLT.
One-off costs include familiarisation with the new rules. There are no expected continuing costs.
Customer experience is expected to remain broadly the same as it does not change how housing co-operatives interact with HMRC.
There is no impact on civil society organisations.
Operational impact (£ million) (HMRC or other)
There will be some costs for changes to HMRC’s IT systems, but these are not expected to be significant.
Other impacts
Other impacts have been considered and none has been identified.
Monitoring and evaluation
The measure will be kept under review through communication with affected groups. As well as through the production of the Annual Tax on Enveloped Dwellings report.
Further advice
If you have any questions about this change, contact ated.technicalqueries@hmrc.gov.uk.