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Budget 2018: Stamp Duty Land Tax on a new Shared Ownership Lease: what's changed?

View profile for Sarah Sams
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As a result of the recent budget, there have been further changes in respect of the relief that First Time Buyers can claim in respect of Stamp Duty Land Tax (SDLT) payable on the purchase of new Shared Ownership properties. 

From 2017, it was the case that you could only benefit from the First Time Buyers Relief if you elected to pay SDLT on the basis of the Full Market Value of the Property.

So, if all the buyers involved in the purchase of a shared ownership lease are first time buyers (meaning that they haven’t owned or jointly owned a property elsewhere and haven’t inherited any properties), they can elect to pay SDLT on the basis of the Full Market Value of the property. If the Full Market Value of the property is £300,000 or under, the purchase would be exempt from SDLT.

For example, if the Full Market Value of the property is over £300,000, no SDLT is payable on the first £300,000 with a rate of 5% being paid on the amount over £300,000. For example, the tax payable on a property with a Full Market Value of £350,000 will only be calculated on the £50,000, which would be £2,500 (5% of £50,000). This relief is not available if the Full Market Value of the property is over £500,000.

Paying SDLT on this basis means that no SDLT is payable when purchasing further shares in the property. 

This election has not changed under the new budget and some SDLT will still be payable if the Full Market Value is over £300,000.

The other option is to elect to pay SDLT on the value of the share being purchased and the rent payable under the lease.  However, you were not previously able to use the First Time Buyer’s relief if you elected to pay SDLT on this basis, meaning that even if the purchase price was below the £125,000 threshold, you might still have had to pay SDLT on the rent and if the purchase price was over £125,000, SDLT would be payable at the usual rates.

Paying SDLT on this basis means that SDLT may be payable on the purchase that takes ownership to 80% or more, and any subsequent shares purchased.

What’s new?

Now, the First Time Buyer’s relief has been extended so that you can claim the relief even if you elect to pay SDLT on the value of the share being purchased and the rent, so long as the Full Market Value of the property is less than £500,000.

The full guidance can be found at:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/
file/751718/Stamp_Duty_Land_Tax_relief_for_first_time_buyers_-_guidance_note.pdf

Retrospective Relief

It has been announced that this relief is to be applied retrospectively, meaning that buyers of new shared ownership leases from 22 November 2017, who have elected to pay SDLT on the value of the share being purchased and the rent, and who would now be entitled to relief, can now claim back any SDLT paid on the grant of the lease.

We are now in the process of contacting all of our clients who may be affected by this change in First Time Buyer’s Relief for the grant of shared ownership leases.

If you have questions or feel you may be affected by this recent change and seek guidance, speak to a member of our Residential Property team today. To contact our experts, call your nearest office or email us a contact@duttongregory.co.uk