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Stamp Duty changes

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Stamp Duty Land Tax (SDLT) is the payment of tax required if you buy a property or land over a certain price in England and Northern Ireland.

There are particular thresholds which determine just how much SDLT is due starting at £125,000 for residential properties. If you are buying your first home however, you get a discount which means you pay less or no tax at all, subject to certain criteria. If you are buying a second home or adding to your portfolio of properties and not replacing your main residence, a surcharge is required on top of the usual tax payment.

Along with the required payment, you must file a return to HMRC this being, on their required forms, a breakdown of the transaction, the property and the parties to the transaction.

Not all transactions require a filing to be made for example those where no money changes hands, property is left in a will or property transferred as a result of the dissolution of a marriage or civil partnership. However, if none of these circumstances apply, even of you are not paying any stamp duty, a filing must be made so as to declare the transaction to HMRC.

Currently, the SDLT filing and payment deadline is 30 days. This means you have 30 days from the ‘effective date’ of the transaction to file the required forms to HMRC and make the required payment to them. The effective date is usually the date the transfer is completed but it can be the date the contract is ‘substantially performed’ be this when the majority (at least 90%) of the purchase price is paid, the buyer becomes entitled to possession or the first payment of any rent due has been paid.

Should the filing and payment deadline of 30 days be missed, there are varying penalties that may be enforced. Inaccuracies in the filing and payment will be scrutinised by HMRC to determine to most suitable penalty. Fixed penalties are charged if the filing or payment is made after the current 30 day window but within 3 months it. This penalty is currently £100. In all other cases the penalty is a fixed £200. For late payment, interest is also charged.

In the Spring 2017 Budget it was announced that HMRC would reduce this filing and payment window to 14 days. It was then announced in the Autumn 2017 Budget that this change would be applied to transactions with an effective date on or after 1st March 2019.

Whilst SDLT is a self issuing tax, meaning it is the responsibility of the individual to ensure the correct amount is paid and filing is made, in most instances the solicitor or licensed conveyancer will undertake this as part of the usual conveyancing transaction having obtain authority on the file from the clients to do so.

The implications for conveyancers and solicitors moving forward is that we will have a shorter window to ensure the correct filing is made and payment is sent. Here at Brethertons, during the course of the transaction, and at the point of signing Contract Papers ahead of exchange of contracts, we ask the client to review, check and sign their approval of the required SDLT forms pertaining to their transaction, we also report to them with a draft completion statement so they can confirm their acceptance of the tax being paid on their behalf. This means that following completion we are able to promptly submit the filing using the HMRC SDLT Portal and instruct our accounts team to send out the payment to HMRC. Doing it this way not only negates the risk of late payment penalties and interest but also allows the very maximum amount of time should HMRC have any queries on the filing. Therefore, whilst we will be mindful of the reduced timescale when it comes to our clients tax obligations, it will not require any change in our day to day processes in the Conveyancing department.

If you would like any advice on Stamp Duty or other Conveyancing matters, please contact our Conveyancing team.

Watch our Stamp Duty vlog for more information here.