This update is further to our initial News Update of 30 November 2015 regarding SDLT changes in the Autumn Review 2015.

There were a number of matters noted in our previous update on which the effect of the SDLT changes had not been clarified.

The Budget 2016 confirmed that the higher rates of SDLT will apply to current homeowners who wish to buy a new primary residence, while converting their existing property into a “buy-to-let”.

It is possible to avoid paying the new higher rates of SDLT in respect of residential properties where contracts have exchanged before 25 November 2015 and are not completed until on or after 1 April 2016 (unless a relief is claimed, such as sub-sale relief).

If contracts were exchanged after 25 November 2015, the higher rates of SDLT will apply if the purchase is completed on or after 1 April 2016.

The government has confirmed that in circumstances where an individual purchases a new main residence before selling their previous main residence, the higher rates shall apply. However, a refund mechanism has been introduced for those who sell their previous main residence within 18 months of purchasing their new main residence. The refund is to apply to the difference in the SDLT paid at the higher rate and the SDLT that would have been due under the primary residential SDLT rates.

The Finance Bill 2016

On 28 June 2016 the government agreed amendments to the Finance Bill 2016 relating to the higher rates of SDLT on additional properties.

The agreed amendments include:

1. The exclusion of annexures from higher rates on additional properties. An annexure is defined as a subsidiary building within the same grounds or the same building as the purchased dwelling and constitutes less than one third of the purchase price attributable to the purchased dwelling.

2. A new provision to allow a purchaser using alternative finance arrangements with an institution (for example a purchase by the institution and a leaseback to the individual borrower) to be treated as a purchaser under the first transaction. This means that the person occupying the property shall pay the higher rate SDLT rather than the institution purchasing the property.

The amendments have effect from 1 April 2016.

Please note that this information is provided for general knowledge only and therefore specific advice should be sought for individual cases.

For further information, please contact John Mills