April 2020 SDLT Briefing

April 2020 SDLT Briefing– Spring-cleaning your files?

In Focus: Potential SDLT refunds

In this month’s briefing, Suzanne O’Hara looks at the time limits for claiming SDLT refunds and highlights a number of key issues to consider when reviewing prior transactions.

Firstly, it is important to understand when you can seek to make a reclaim of SDLT.
 

SDLT time limits

• 12 months to file an amended SDLT return
• 4 years for an overpayment of SDLT claim
• Repayment of 3% higher rates must be made within 12 months of the sale of the previous main residence, or within 12 months of the filing date of the SDLT return relating to the new residence, whichever comes later.

Amending a return – 12-month period

An SDLT return can be amended within 12 months from the filing date of the original return (14 days after the effective date).
When amending substantial errors, a new SDLT return must be submitted with the correct information. In addition, written correspondence must be provided to the Stamp Duty Land Tax Office giving reasons for the new return and giving the UTRN of the incorrect and correct returns.
 

Potential reliefs to consider:

• Multiple dwellings relief – available in transactions involving two or more dwellings
• First Time Buyer’s relief – available for first time buyers purchasing dwellings with chargeable consideration below £500,000
• Group relief – available to companies in the same 75% group
• Reconstruction and acquisition relief
• Sub-sale relief
• Charities relief
• Certain acquisitions of residential property

This is not an exhaustive list but highlights some of the key reliefs available to reduce the SDLT exposure for certain transactions.

Overpayment of tax claim

Overpayment claims can be made where too much SDLT has been paid and the time limit for these claims is 4 years from the effective date of the transaction. Crucially, they cannot be made where a specific relief has been missed. Accordingly, the aforementioned reliefs must be accounted for within the 12-month amendment window.

However, the following scenarios could be considered for the extended 4-year period:
 

• Incorrect classification of the property – i.e. residential v non-residential:
  • Dwellings with agricultural land or commercial land attached
  • Linked transactions involving residential and non-residential should be treated as non-residential
  • Purchases of 6 or more dwellings should be treated as non-residential
  • Other properties classified as non-residential include:
    • a home or other institution providing residential accommodation for children;
    • a hall of residence for students in further or higher education;
    • a home or other institution providing residential accommodation with personal care for persons in need of personal care by reason of old age, disablement, past or present dependence on alcohol or drugs or past or present mental disorder;
    • a hospital or hospice;
    • a prison or similar establishment;
    • a hotel or inn or similar establishment.
• Was SDLT paid when it shouldn’t have been? Exempt land transactions include:
  • Transactions with no chargeable consideration (care required when looking at transactions involving debt and connected companies)
  • Transactions in connection with divorce (and agreements made in contemplation of the dissolution or annulment of a marriage)
  • Transactions effected under the terms of a will (and variation of testamentary dispositions)
  • Freehold property acquisitions with chargeable consideration of less than £40,000
  • Acquisition of a new or assigned lease of 7 years or more, provided the premium is less than £40,000 and the annual rent is less than £1,000
  • Acquisition of a new or assigned lease of less than 7 years, provided the amount paid is less than the residential or non-residential SDLT threshold

 

Reclaiming the 3% higher rates

A homebuyer can reclaim the 3% surcharge if they dispose of their old main residence within 3 years of the purchase of their new main residence and they lived in that property at some point during the 3 years prior to the new purchase.
It is interesting to note that the disposal of the old main residence need not be by way of an open market sale, but could be by reason of any of the following:

• Outright gift to another individual
• Transfers to a connected company
• Transfers to a trust
• Transfer on a divorce

I hope this article gives some food for thought during the lockdown period and also acts as a helpful reminder of factors to consider in future transactions.