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A relief is available from stamp duty for the purchase of a dwelling by a first-time buyer under FA 2003, s 57B and Sch 6ZA for land transactions for with an effective date on or after 22 November 2017. Unlike earlier such reliefs (most recently the one which applied from 25 March 2010 for two years) there is no end date.
The relief applies only if the purchase price is £500,000 or less and it works by applying a zero rate on consideration up to £300,000 and a 5% rate to any excess between £300,000 and £500,000. This is achieved by modifying the normal Table A rates as follows:
Relevant consideration Percentage
So much as does not exceed £300,000 0%
Any remainder (so far as not exceeding £500,000) 5%
The relief must be claimed in the land transaction return (using the specific code “32” in the SDLT1 return).
The two main complexities in relation to the application of the relief are whether the land transaction is within the scope of the relief and whether the purchaser qualifies as a first-time buyer.
The main subject-matter of the chargeable land transaction must be a major interest in a single dwelling, the garden or grounds of that dwelling and interests or rights that subsist for the benefit of the dwelling and its garden or grounds. “Major interest” for this purpose does not include leasehold interests with less than 21 years to run. The transaction must not be linked to any other land transaction unless that transaction is in relation to the garden, grounds and rights (and the total consideration is within the £500,000 limit).
The land transaction must not include more than one dwelling (such as a house with a separate granny flat) or a non-residential element. Nor must the transaction be a “higher rates” transaction as defined in Sch 4ZA para 1 – that is to say a purchase of an additional dwelling. Where the relief applies initially, a subsequent linked transaction may invalidate the relief by pushing total consideration above £500,000, by including non-residential land or more dwellings, or introducing further purchasers. If the relief is invalidated then additional SDLT becomes payable in respect of the initial transaction.
Since the aim of the relief is to help first-time buyers there are restrictions on which purchasers are eligible. The purchaser or, if there is more than one, all of the purchasers must be individuals. The relief can apply if the purchaser is a nominee or bare trustee for an individual first-time buyer – though not if the interest is the grant of a new lease as a result of the rules in Sch 16 para 3(3) which treats the nominee or bare trustee as the purchaser given that such a person is not an “individual” for SDLT purposes. None of the purchasers may previously have owned a major interest (including a beneficial interest) in a dwelling anywhere in the world (though leases with less than 21 years unexpired are ignored). All of the purchasers must intend to occupy the dwelling as their only or main residence.
Relief can apply in relation to a shared ownership lease or the declaration of a shared ownership trust but only where “market value” treatment applies or has been opted for.
Where a dwelling is purchased through an alternative finance arrangement, relief may be claimed in relation to the “person” who is entitled to occupy the property as a result of the arrangements referred to in FA 2003 ss 71A and 73 FA rather than the financial institution that is the purchaser.
If you require advice or assistance with SDLT, contact Patrick Cannon today.