Posted 14th February 2022 by ctatax-admin
‘How long is a piece of string?’ goes the old cliché, the rejoinder ‘Twice the distance from the centre to one end.’ Stamp Duty, or Stamp Duty Land Tax (aka SDLT) to give it it’s correct legal name, is a subject which can often provoke the former as a response, and unfortunately the latter does not present much help.
Because as pithy as it might sound, what do you do if the distance from the middle to one end is not easy to calculate, or is in different units, or subject to change depending on how you measure it?
In theory, SDLT is easy enough to calculate. Go to HMRC’s website (or indeed simply google ‘How much SDLT?’) and you’ll find easily enough the basic standard tables of numbers which suggest that SDLT is a static feast – a simple set of intractable numbers which are contingent on the precise purchase price paid for a property.
Look a little deeper however, and you’ll soon pick up on the first wrinkle – the so-called ‘slice system’ which was brought in to replace the old – and felt to be unfair – ‘slab system’. Put simply, where your SDLT liability would once be calculated as a percentage of the total purchase price paid, now that liability is split across different ‘slices’ of that price – 0% on the first £125,000, 2% on the next £125,000 up to £250,000 – on it goes, arbitrary percentages of arbitrary ‘chunks’ of your purchase price which are all added up to make the Frankensteinian monster of your final SDLT liability. And we’re just getting started.
Buying a second residential property? Maybe a holiday home or a Buy To Let nest egg? Well, then you’re going to be looking at an additional 3% per relevant ‘slice’ of the purchase price as a ‘surcharge’ on top of the SDLT you would normally pay – i.e. you’ll pay 3% on the first £125,000, 5% on the next £125,000 and so on. Then you have to consider whether or not the transaction may qualify for relief from this surcharge, or whether indeed you may qualify for a refund of it at some future date if there is a relevant change in your circumstances like the sale of your existing residence.
But there’s more – if you invest in a group of residential properties – maybe you’re a successful portfolio owner who buys a block of flats – then you may find the transaction subject to Multiple Dwellings Relief (MDR) which can actually act to reduce your SDLT liability. Though MDR can apply to other types of transaction as well, it seems most ironic here.
Are you a foreign national or have you spent a significant amount of time abroad lately? Well if you are buying a residential property, get ready, as of April this year, to pay an additional 2% surcharge on each ‘slice’ of the purchase price as well, and if you were wondering yes, this one is just as complex as the previously mentioned 3% surcharge in terms of how and whether it applies, and what exemptions and so on may apply.
There are currently also 40 different reliefs and exemptions in the SDLT legislation which may act to mitigate some or all of the notional SDLT liability on a purchase, based on the type of property, the circumstances of the buyers, the nature of the transaction and many other factors. Navigating SDLT on anything other than the most straightforward of purchases can be a nightmare, both for purchasers and their legal advisers, who are often relying on a calculator supplied by HMRC which often misses various factors and which HMRC themselves have referred to as intended merely ‘as a guide’ rather than a final calculation upon which to rely.
So it’s not just the length of the string – it’s what it’s made of, how it’s being measured, who will own it and a multitude of other factors which will determine that final number. How much is Stamp Duty? Best ask an expert, lest you make a sizeable (and costly) mistake.