Stamp duty land tax is the tax on the purchase of properties in England and Northern Ireland. There are some circumstances where you may be able to pay a lower rate of stamp duty or may be exempt altogether.
In some cases, the exemptions are very straightforward – for example, if you are a first-time buyer, or if the property price is below a certain threshold (this has changed due to Covid-19 – details are listed below).
You are eligible for reduced rates of SDLT in rather more complex circumstances, such as if you are buying a property that combines more than one dwelling in the same transaction (Multiple Dwellings Relief), or if you are buying a property with residential and commercial elements (eg a flat over a shop, or a dwelling within an office complex).
There are many advisors who will offer schemes to avoid stamp duty. In these cases, you should tread with great care. Many advisors knowingly or misguidedly sell such schemes to property buyers for a fee, only for the buyer to face an HMRC investigation into tax avoidance or evasion.
Such investigations can lead to litigation and have a serious impact on your business and your reputation and can even lead to criminal prosecution.
It is vital to get the advice of a tax expert before you proceed. SDLT is a self-assessed tax, so if you fail to properly declare a property purchase to HMRC, this can be regarded as tax fraud.
Patrick Cannon has 35 years of experience as a tax barrister, with specialist expertise in property law. As a direct access barrister, he can be instructed without the need to approach a solicitor first.
Whether you are looking for SDLT advice prior to a property purchase, facing HMRC enquiries or seeking representation in court, contact Patrick Cannon here.
When do you not have to pay stamp duty?
You may be exempt from paying Stamp Duty Land Tax if:
- You’re a first-time buyer in England or Northern Ireland, and the property is worth less than £300,000.
- The property has been left to you in a will.
- The property is transferred because of divorce or separation.
- The property is worth less than £40,000
- The property is given as a gift or transferred with no money or other payment exchanging hands.
- The property is moveable (eg mobile home)
- The property is a houseboat (unless it comes with a large garden, then you may still be charged)
Under Covid-19 rules, all residential properties purchased for £500,000 or less were exempt from SDLT. The exemption comes to an end on 30 June 2021, after which the threshold is £250,000. In October 2021, the threshold returns to £125,000.
Stamp Duty Avoidance Schemes
HMRC explicitly singled out SDLT avoidance schemes in 2010 and advised solicitors not to actively promote these schemes. However, these type of schemes are still freely available, and many are being aggressively sold to property buyers.
The complexity of stamp duty avoidance schemes makes them difficult to investigate and difficult for even the buyers to understand. It really needs to be emphasised that an experienced tax lawyer should be consulted if you are considering buying into an SDLT scheme. While some are legitimate, many could land you in hot water with HMRC.
Equally, if you have already been sold an avoidance scheme and are facing an HMRC investigation, you’re advised to instruct a tax barrister to manage your HMRC correspondence or to defend your position. In cases of a mis-sold scheme, the advisor who sold you the avoidance scheme may be shown to be at fault, rather than the purchaser.
An experienced tax barrister will guide you through the potential pitfalls of an SDLT avoidance scheme, manage any correspondence and interviews with HMRC, and provide expert representation in court.
What is Stamp Duty Mitigation?
Stamp duty rates may be reduced in certain circumstances. An expert tax lawyer will be able to guide you through the legalities of mitigating SDLT, whether through multiple dwellings relief, mixed-use property or if you are buying a house with a granny annexe, for example.
How Can I Avoid Paying Stamp Duty on a Second Home?
There is a higher rate of stamp duty on second homes at 3% added to all the normal SDLT rates – but there are exemptions.
These include buying another home during a divorce or separation, buying a mixed-use property, or buying a second or additional home to be used as your main residence (in which case you have to prove that you have disposed of your previous main residence).
If you buy a new main residence before your previous one is sold, you will have to pay the extra 3% surcharge, but then have 36 months to claim it back, once you’ve sold or gifted your original property.
Social landlords and charities are also exempt from the 3% surcharge.
How Can Patrick Cannon Can Help
If you have any enquiries about avoiding SDLT, Patrick Cannon has decades of expertise in this complex area of tax law. He will advise you about all aspects of SDLT – whether it’s reviewing a mitigation scheme, helping you reclaim overpaid tax after purchase or defending you in cases of HMRC investigation and litigation.
Contact Patrick Cannon here to discuss any aspects of Stamp Duty Land Tax mitigation.
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For professional and insurance reasons Patrick is unable to offer any advice until he has been formally instructed.