Since December 2014, SDLT on residential property in England, Wales and Northern Ireland has been payable based on progressive rates ranging from 0% (up to £125,000) to 12% (over £1.5million).
In the 2015 Autumn Statement, the Government announced that an additional 3% SDLT would apply from 1 April 2016 to the current rates for the purchase of additional residential properties above £40,000.
The slab rate of 15% SDLT continues to apply where a non-natural person purchases residential property for more than £500,000 – ie a ‘Higher Threshold Interest’.
Following the recent consultation on the application of the additional 3%, the Government has confirmed that this 3% rate will be applied to the purchases of additional residential property completed from 1 April 2016 onwards. Perhaps, the biggest surprise to the announcement is that there will be no exemption from this additional 3% for large investors or large transactions.
There will be a relief for individuals who are replacing their main residence – the replacement of a main residence should not be subject to the 3% SDLT provided that the new residence is purchased within 36 months of sale of the old residence – an increase from the proposed 18 months. For purchasers who sold their residence before the Autumn Statement, the 36 month window will commence from 25 November 2015.
If the new residence is purchased before disposal of the existing residence, the additional 3% SDLT will initially be payable and can be reclaimed, provided the old residence is sold within 36 months.
In determining the number of properties, worldwide residential properties will be included. The only exemption will be if a small share (50% or less) in a property has been inherited within 36 months of a purchase, such a property will not be considered ‘additional’.
Where the property is acquired by joint purchasers, all of the purchasers would need to fulfil all of the conditions regarding the main residence test for the additional 3% not to apply.
For married couples, following the consultation, the Government has agreed that they should be not be treated as one unit for the purposes of determining the number of properties held, where they are living separately in circumstances that are likely to become permanent.
This measure will no doubt further dampen the residential property market and many of the larger investors will be disappointed that no exemption has been given for the industry sector.
Purchasers of residential property situated in England, Wales and Northern Ireland may well be liable to the additional 3% SDLT from 1 April 2016 and will need to look at their existing property interests and structures –even if in some circumstances the additional SDLT is subsequently refundable.