In an earlier blog (26 November 2015) about the new penal rates of SDLT on “additional residential properties” (“ARPs”), I asked what happens if someone who lives in accommodation provided by their employer buys a “second” home? The Financial Secretary to the Treasury, David Gauke, has recently answered this question in a written Parliamentary Answer:
“Work-related accommodation which is provided and owned by an employer does not count when considering whether an individual is purchasing an additional property or not.”
Another Parliamentary Answer confirmed that purchasers who own another property anywhere else in the world and who purchase an ARP in England, Wales or Northern Ireland will be charged at the new ARP rates. A home-owning Scot who buys a holiday home in England will pay at the penal ARP rates, but a home-owning English person buying a holiday home in Scotland will not; unless Scots Land and Building Transaction Tax is altered to coincide with the new English rules.1
Earlier we were told that draft legislation would appear in January. It now seems that it will not appear until after the consultation exercise is over. On this basis we now have reason to hope that the consultation document will appear before Christmas.
Journalists appear to have more luck than lawyers and accountants in eliciting information from the Treasury about the ARP regime. The following bullet points summarise what some journalists have said they have been told by the Treasury. This “hearsay evidence” should be treated with the greatest caution.
- The new ARP rates will apply to the purchase when home-owning parents assist their offspring onto the property ladder by becoming joint purchasers of the child’s new home. Such parental joint ownership is often required by the lender.
- A buyer of a dilapidated house who keeps an existing home until the works on the new one are finished will have to pay at the new ARP rates; and then hope the works finish and the old property can be sold within 18 months, so that they can apply for a rebate of the extra 3% element. In comparison, buying a property that isn’t a dwelling to start with, for example a redundant church or a barn, will not incur the ARP penalty, even if it is later converted into a dwelling.
- Swapping one main residence for another while also owning a holiday home or a buy-to-let property will not incur the ARP penalty. The statutory definition of “main residence” will thus be enormously significant.
- Married couples and those in civil partnerships will be disadvantaged. If Charlie and Robin cohabit outside matrimony or civil partnership, Charlie can buy an ARP without paying SDLT at the penal rates, even if Robin already owns another dwelling. But if Charlie and Robin are married or civil partners and either or both of them own a dwelling, then any other dwelling acquired by either or both of them will constitute an ARP and the new penal rates will apply.
- Apparently purchasers will have to make a written declaration stating whether or not they own another home. Their solicitor will rely on that when advising which SDLT rate applies and completing the SDLT return.
1Additional note 17/12/2015. It will be so altered. Scotland’s Deputy First Minister, John Swinney, announced the Scottish Government’s 2016-17 Draft Budget on 16th December. It includes an LBTT “second-homes” supplement on purchases of additional residential properties, including holiday homes and buy-to-let properties.