A second bite of the cherry – SDLT relief for first time buyers (again)

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The Budget of 22 November 2017 served up one SDLT surprise, by resurrecting an SDLT relief for first time buyers. As usual with SDLT legislation, the relief is technically quite complex – and full of traps for the unwary.

Some years ago, the Finance Act 2010 introduced an SDLT relief for first-time buyers that took effect from 25 March 2010. The relief was popular (not least with this author’s brother) but also temporary, coming to an end after only two years.

The November 2017 Budget introduced an equivalent SDLT relief, but this time with permanent effect. Before turning to the requirements for the relief, it’s worth noting that the 2010 relief was a single, reasonably short section (s57AA FA 2003). The legislation for the new relief is four pages long (and will become Schedule 6ZA FA 2003). This illustrates the increasing complexity of SDLT legislation, especially in relation to residential property.

The requirements of the new relief are: 

  • The acquisition must be of a freehold interest (or 21+ year lease) in a single dwelling. 
  • The consideration must not exceed £500,000. 
  • The purchaser (or all of them if there is more than one) must: 
    • be an individual; 
    • be a “first-time buyer”; 
    • intend to occupy the purchased dwelling as their main home. 
  • The transaction must not be linked to any other (save as regards the purchase of the dwelling’s garden, grounds or subsisting land).

The relief applies where the effective date (broadly, completion) of the purchase is on or after 22 November 2017.

If the consideration does not exceed £300,000 no SDLT is payable at all. For acquisitions between £300,000 and £500,000 the SDLT charge is 5 per cent on the amount between those two thresholds.

Several points are worthy of note: 

  • Joint purchases are dangerous. Every single co-purchaser must be an individual, a first-time buyer (ie, has never owned or purchased another dwelling anywhere in the world), and intend to occupy the new dwelling as their main home. 
  • Ownership of another dwelling includes circumstances where that interest was inherited or gifted to the relevant person. 
  • The relief does not apply if the 3 per cent SDLT surcharge applies to the transaction (meaning that the complex provisions of that legislation always needs to be considered before a claim to relief can be made). 
  • No relief is available for mixed used properties (eg, a shop with flat above), or purchases of more than one dwelling. 
  • There is a clawback provision (unlimited by time) which means that a subsequent linked transaction can result in the withdrawal of the relief – most obviously by merely having that linked transaction, but also potentially by pushing the aggregate consideration for the dwelling plus its gardens or grounds above £500,000.

As ever, the introduction of this new relief could be complex where trusts are involved: 

  • The requirement that the first-time buyer be an individual would rule out the relief for most trust purchases (but probably not for bare trustees as the beneficiary is treated as the “purchaser” for SDLT purposes). 
  • An individual can still be a first-time buyer in cases where the previous acquisition of another dwelling was as trustee (unless, as far as HMRC is concerned, the individual was also a beneficiary of the relevant trust – though this part of the HMRC guidance does not seem to be supported by the legislation).

A new SDLT relief is always to be welcomed, though it will be interesting to see whether it simply increases house prices ever further for first-time buyers.

It is also to be hoped that something may soon be done about the thicket of complex SDLT provisions currently surrounding residential property acquisitions (15 per cent rate, 3 per cent surcharge, multiple-dwellings relief, rules for six or more dwellings and so on). At present, quite simple transactions can have unexpectedly difficult and technical SDLT analyses.

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