Property and Stamp Duty Land Tax implications of the 2012 Budget

The 2012 Budget has introduced a number of new measures that will affect the property industry specifically in relation to high value residential transactions and the payment of Stamp Duty Land Tax. 
Stamp Duty Land Tax

1.) For individuals

7% SDLT will be charged on the purchase (by freehold acquisition, assignment or lease premium) of residential property where the chargeable consideration is more than £2 million. 

This new rate will apply to any transactions where the effective date (generally the completion date) is on or after 22 March 2012. 
The 5% SDLT rate will continue to apply for residential properties which exceed £1 million.

2.) For "non-natural persons"
15% SDLT will be charged on the purchase (on the same terms as noted above) of residential properties by "non-natural persons" where the chargeable consideration is more than £2 million. This has taken effect from 21 March 2012. 

The definition of "non-natural persons" includes companies, collective investment schemes (including unit trusts) and partnerships that include a non-natural person as a partner. 
Government guidance has suggested that property developers and corporate trustees will be excluded from the charge in certain circumstances, although these circumstances have not yet been identified.

There are also proposals to bring in an annual SDLT charge on residential property owned by Non-natural persons by April 2013. Consultation on this proposal is expected to commence very soon, although some commentators have indicated the following possible annual charges:

- Properties valued between £3 million and £5 million: £5,000.

- Properties valued between £5 million and £10 million: £35,000.

- Properties valued between £10 million and £20 million: £70,000.

- Properties valued above £20 million: £140,000.

It is even proposed that these charges would apply to residential properties already held by non-natural persons and not just those purchased after April 2013.

3.) Abolition of SDLT reliefs

A number of SDLT reliefs will be abolished for land transactions from 6 April 2013. Those reliefs abolished include relief for certain leases granted by and transfers to social landlords, shared ownership schemes, disadvantaged areas and partial relief for company acquisitions. The company acquisition relief relates to the two different rates of stamp duty for land transfers and share transfers.

4.) Anti-avoidance schemes

With immediate effect future SDLT avoidance schemes will be closed down. Consultation will be issued in summer 2012 with a view to introducing legislation in April 2013.

5.) End of the First Time Buyer SDLT Relief 

Something which the Budget has not focussed on is that on 24 March 2012 the first time buyers SDLT exemption on the purchase of residential properties of up to £250,000.00 came to an end. First time buyers will instead now be subject to SDLT on residential purchases of £125,001.00 and above.

Posted on: 27/03/2012

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.

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