SDLT Case Notes – August 2020

Welcome to August’s edition of the Stamp Duty Land Tax Case Notes from SDLT expert John Shallcross.  As well as a number of guides on line, he is putting on line case notes, intended as short pieces on SDLT issues which arise from day to day.

These might be of interest to a variety of people, but are mainly aimed at other property lawyers.  An increasing part of John’s practice is acting on a consultancy basis to support conveyancers who advise on SDLT, but sometimes need specialist input.

You can stay up to date with all of our SDLT insights by signing up to receive our new stamp duty land tax update. Under the heading ‘Legal interests’ you should select ‘Stamp duty land tax’.

Case notes

Multiple dwellings relief, Merchant and Gater v HMRC – 3 August 2020

We have a second decision of the First Tier Tribunal on multiple dwellings relief, Merchant and Gater v HMRC, released on 20 July 2020.  It follows the Fiander and Brower case.  In the Merchant and Gater decision, only limited consideration was given to whether the property acquired was suitable for use as two dwellings.  It was decided that it was not suitable for use as two on the basis that the “annexe” was only accessible from a shared hallway.  Although there is not a full explanation, it seems likely that the hallway was an integral part of the main dwelling, with a number of doorways to the living accommodation in the main part.  This would have meant that the main house did not have the necessary degree of privacy and security if an unrelated household was living in the “annexe”.  Issues arising where a property might comprise two dwellings are dealt with in my blog about granny flats, though I have yet to update it for the Merchant and Gater case or the temporary reduced rates of SDLT.

Extension of three year time limit for selling an “old home” – 2 August 2020

Perhaps the second most interesting piece of SDLT news for me, since last posting my Case Notes in May 2020, is a change to the three year time limits.  This was announced in Parliament on 3 June 2020.  The scenario is where someone bought a new home to live in, but had to pay the extra 3% SDLT because they retained a former home.  There is a time limit of three years within which to sell (or otherwise dispose of) the old home if the 3% paid on the new home is to be recovered.  Some people coming up against the three year time limit during the lockdown period were not able to complete the sale of their old home within the three year period.  The change in the rules is designed to help them.  It is very tightly defined and will not apply often.

HMRC added a page to their SDLT Manual explaining their interpretation of the new rule and also updated their pages:

• SDLTM09800 about the exception from the 3% surcharge for the replacement of an only or main residence
• about the procedure to reclaim the extra 3% once the old home has been sold.

The Finance Act 2020 gained Royal Assent on 22 July 2020.  Section 76 contains the provisions for the extension in exceptional circumstances.

The exceptional circumstances extension is only for cases where the old home cannot be sold within the three years after the purchase of the new home.  There is a similar problem for a person who (if they are to escape the 3% surcharge) needs to complete the purchase of a new home within three years after the sale of an old home (because they own another property).  Representations were made to Government to allow an exceptional circumstances extension in this situation as well, but this was rejected.

Temporary reduced rates of SDLT, the SDLT holiday – 1 August 2020

I last updated my “SDLT Case Notes” in May 2020, so there is a lot to catch up on.  The biggest SDLT news is the temporary reduction in the rates of SDLT for residential property announced in the Economic Statement on 8 July 2020 and taking effect straight away.  I have written and updated a blog about the changes which are due to last until 31 March 2021.  There had been some press speculation about the SDLT reduction from the Saturday before (4 July), so the period of uncertainty was not long.

There was frustration for those who had completed before 8 July 2020 and so did not benefit from the changes.  There were also issues for many buying newly built properties where there was an incentive or allowance of “SDLT paid” from the seller.

The most surprising thing about the changes is that the rates of SDLT were also reduced for cases where the 3% surcharge applies, such as companies buying dwellings or someone buying a new home when keeping their old one.  Whilst the 3% still applies, the “basic” SDLT is reduced.  This gives a saving of up to £15,000; the full saving applies when the price is £500,000 or more.

My blog addresses points like the position where property might be “mixed use” (such as a house with a paddock / field) or where multiple dwellings relief could be claimed.

More SDLT case notes can be viewed here:-

• September 2019 – February 2020
• March 2020
• April 2020
• May 2020

These notes are intended for general information purposes only and do not constitute legal or professional advice. Advice should be sought before proceeding with any transaction.