Stamp Duty Land Tax: higher rates - minor amendments
Published 22 November 2017
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Who is likely to be affected
These are:
- people who sell only part of their former main residence
- people who own residential property then buy another following a divorce
- people who own residential property then buy an additional interest in their main residence, or extend their lease
- spouses transferring property between each other
- trustees who buy residential property for children whose affairs are subject to the Court of Protection, and the children
General description of the measure
The measure grants relief from tax due under the higher rates of Stamp Duty Land Tax (SDLT) in certain cases, including where a divorce related court order prevents someone from disposing of their interest in a main residence, and where a spouse or civil partner buys property from another spouse or civil partner, and where a deputy buys property for a child subject to the Court of Protection, and where a purchaser adds to their interest in their current main residence. It also closes down an avoidance route.
The measure also counteracts abuse of relief when someone who changes main residence retains an interest in their former main residence.
Policy objective
The measure improves the operation of the higher rates of SDLT.
Background to the measure
The higher rates of SDLT have applied since April 2016 to all those who purchase residential property when they already own at least one property, and are not replacing their main residence. The higher rates are 3% above the standard rates of SDLT.
The measure was announced at Autumn Budget 2017.
Detailed proposal
Operative date
The measure will have effect for transactions on or after 22 November 2017.
Current law
Schedule 4ZA to the Finance Act 2003 makes provisions to charge the higher rates of SDLT (Higher rates for additional dwellings (HRAD)).
Proposed revisions
Legislation in Finance Bill 2017-18 will introduce changes to Schedule 4ZA to FA 2003.
Amendments will:
- prevent abuse of relief for replacement of a purchaser’s only or main residence by requiring the purchaser to dispose of the whole of their former main residence and to do so to someone who is not their spouse
- disapply HRAD where an individual buys a property from their spouse or civil partner
- disregard certain interests retained by a former spouse or former civil partner upon dissolution of a marriage or partnership - it disregards an interest if it is held under certain ‘property adjustment orders’, for example in the case of a divorce
- make changes so that a property held by a child’s parents is disregarded when a property is purchased by a child’s trustee pursuant to power conferred on the trustee by a relevant court appointment, for example such an appointment made by the Court of Protection
Full details of the legislation as set out in the Explanatory Note published on 22 November 2017.
Summary of impacts
Exchequer impact (£m)
| 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 |
|---|---|---|---|---|---|
| negligible | negligible | 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 will clarify the rules where HRAD applies. The changes are expected to benefit families in cases of separation, divorce and where properties are held in trust for children.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
The changes are expected to benefit those getting a divorce and children where properties are held in trust. There are no other equalities impacts.
Impact on business including civil society organisations
These proposals are expected to have a positive impact on some 4,000 conveyancers and property professionals by clarifying the rules when the HRAD applies. The impact on admin burdens is expected to be negligible. One-off costs include familiarisation with the new rules. It is not expected there will be any on-going costs.
There is no impact on civil society organisations.
Operational impact (£m) (HM Revenue and Customs (HMRC) or other)
HMRC will not incur any additional costs to implement these changes.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
HMRC will continue to review how the policy on SDLT higher rates operates in practice through review of correspondence with taxpayers and liaison with stamp taxes practitioners.
Further advice
If you have any questions about this change, please contact David McDowell by email: david.mcdowell@hmrc.gsi.gov.uk