Simon Howley considers the various reliefs that exist for stamp duty land tax to oil the wheels of the housing market.
Various reliefs exist by exempting intermediary purchasers by property traders from SDLT. None of these exemptions directly benefit the private dwelling purchaser.
Property trader means a person carrying on a business (almost inevitably a trade) of buying and selling dwellings if, and only if, the person is a company, a limited liability partnership or an ordinary partnership; and in the case of an ordinary partnership, only if all the partners are companies or LLPs.
There are various conditions which a property trader must comply with. The exemption is not given to traders who intend to develop the old dwelling or site materially. Therefore, the trader must not:
- intend to spend more than £10,000 or 5% of the price of the dwelling;
- intend to grant a lease or licence of the dwelling; and
- it must not intend to permit any of its principals, employees, or anyone connected with them to occupy the old dwelling.
Purchase of buyer’s old dwelling by housebuilder (Schedule 6A para.1)
Where a house building company sells a new dwelling to a buyer and acquires the buyer’s old dwelling, the housebuilder is, if several conditions are satisfied, exempt from tax on its acquisition of the old home.
Relocation of employment: purchase of old dwelling by an employer (Schedule 6A para.5)
If an employee has to move because of their work, their employer can be exempt from tax on that purchase if they sell their old dwelling to their employer. The purchase must be from the employee themself; a purchase simply from the employee’s spouse alone will not qualify. The employer must make the purchase. The employee must have occupied the dwelling as their sole or principal residence during the previous two years.
Purchase of new building buyer’s old dwelling by property trader (Schedule 6A para.2)
Exemption from SDLT can also be given to a property trader where it is a property trader rather than the housebuilder itself who buys the old dwelling.
Purchase of old dwelling by a chain-breaking trader (Schedule 6A para.4)
This relief is designed to encourage the rescue of a purchase fouled by a chain. Where an individual has arranged to sell their old dwelling and buy another, and the arrangements to sell the old dwelling fail, a purchase of the old home by a property trader to enable the individual’s acquisition of the second dwelling to proceed is exempt.
Purchase of dwelling by a trader from personal representatives (Schedule 6A para.3)
Where a property trader buys a dwelling from a deceased individual's personal representatives (PRs), its purchase can be exempt. The purchase must be from the PRs as PRs, not from a beneficiary, legatee, or trustees. The deceased must have occupied the dwelling as their only or primary residence within the two years before his death.
Clawback of exemption in property trader cases (Schedule 6A para.11)
In all the property trader cases, if the exemption is obtained but the trader’s intentions about excessive refurbishment, leasing and licensing or allowing employees, etc. to occupy are not fulfilled, in other words, if any of those things happen while the trader still owns the property, the exemption is clawed back, and the SDLT that would have been payable becomes payable by the trader.
The purchaser should make a ‘return’ in the form of a letter to the Stamp Office and pay the tax within 30 days of the disqualifying event. Interest on unpaid tax runs from the end of those 30 days.
Practical tip
The critical points to remember:
- The purchaser must be a property trader as defined.
- There is no time limit after which this clawback cannot apply.
