Stamp Duty Land Tax - A Brief Guide
Stamp duty is over three hundred years old and the legislation was last consolidated in 1891. The government felt that a major revision and updating of the regime was long overdue and the result is a new stamp duty land tax (SDLT) effective from 1 December 2003 on most transactions involving UK land. We give you a brief guide to the new tax in the form of questions and answers so that you can see at a glance what has changed and what hasn’t. As ever the devil is in the detail and the new rules occupy some 150 pages of the 2003 Finance Act! It may be that you have questions on the new regime; please talk to us if you do.
Who is liable to pay SDLT?
It will continue to be the purchaser who is liable to pay SDLT normally by reference to the completion date of the transaction. An avoidance mechanism sometimes used under the old regime was to have a valid contract but to leave the deal ‘resting on contract’ and not to complete in the normal way. This technique will not work under the new SDLT regime because even if a deal isn’t completed in the traditional way, paying for the property and/or occupying it will be enough to create a liability.
How much SDLT will I have to pay?
Broadly the amount of SDLT payable will be the same as the liability under the stamp duty regime. The rates and bands are summarised below.
SDLT
|
| Residential property |
Rate % |
| £0 - £60,000 |
0 |
| £60,001 - £250,000 |
1 |
| £250,001 - £500,000 |
3 |
Over £500,000
|
4 |
| Non-residential or mixed |
| £0 - £150,000 |
0 |
| £150,001 - £250,000 |
1 |
| £250,001 - £500,000 |
3 |
| Over £500,000 |
4 |
As with stamp duty, where the consideration exceeds £60,000 (£150,000 for non-residential property) SDLT at the appropriate rate is payable on the full consideration.
However there are some important differences between the old and new regimes as follows:
- the 0% band for non-residential property is increased from £60,000 to £150,000
- new rules have been introduced where there is a lease
- the rules for ‘disadvantaged areas’ have been improved with complete exemption from SDLT on non-residential property and a continuing threshold of £150,000 for residential property.
Have the rules on payment and administration changed?
This is where some of the most significant changes have been made. SDLT has been brought kicking and screaming into the 21st century with the introduction of a self assessment regime similar to that already in place for income tax and corporation tax. The purchaser of a property will need to file a ‘land transaction return’ and pay the SDLT within 30 days of completion. Failure to do so will result in automatic penalties and interest. Returns can be amended within 12 months and the Revenue has the power to enquire into a return within nine months. The Revenue will issue a certificate to confirm compliance with SDLT and this will be needed in order that the transaction can be filed with the various UK land registries.
Self-certification will be possible in situations where a land transaction return is not required.