HMRC reviewed two possible reforms to the Stamp duty land tax (SDLT) from 30 November 2021 to 22 February 2022.
What is the Stamp duty land tax and who is liable for it?
SDLT is currently charged on land transactions in England and Northern Ireland that are over the threshold of £125,000 for residential properties and £150,000 for non-residential properties.
First-time buyers are entitled to a tax relief if the purchase price is less than £500,000.
What are the proposed changes to the tax?
Mixed-use property
One of the possible reforms relates to mixed-use properties, in order to crack down on people unfairly benefitting from using the lower non-residential rates.
Due to these concerns, HMRC’s consultation had a focus on the introduction of a new apportionment tax calculation for mixed-use properties.
In the case that this were introduced, individuals buying a mixed-use property would be liable to pay SDLT rates for both residential and non-residential properties in proportion to its use.
Multiple Dwellings Relief (MDR)
Currently, SDLT is charged per transaction.
Therefore, buying multiple dwellings that are part of one transaction could be liable to pay more tax than if the properties were purchased individually.
To combat this, MDR aims to lower the amount of SDLT due on multiple dwellings to nearer to the amount that would be due on individual residential properties to reduce barriers to investment.
However, in the consultation, HMRC expressed concerns of ‘unreasonable claims’ for MDR. For example, people submitting a return claiming that a garage with a toilet classifies as a separate dwelling.
To reduce the number of incorrect claims for MDR, HMRC consulted on various legislative actions.
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