Key Stamp Duty Developments: LTT in Wales, and refunds for first time buyers (shared-ownerships)

A new year reminder of two significant changes to stamp duty in 2018 that practitioners should be aware of.

Wales

Stamp duty land tax (SDLT) has been replaced by a land transaction tax (LTT) for land and property purchases in Wales. This came into effect for transactions which completed from 1 April 2018. LTT is operated and collected by the Welsh Revenue Authority and no HMRC returns are required. The revenues raised through LTT are to be used to benefit public services in Wales.

The principles and rules for LTT are set out in the Tax Collection and Management (Wales) Act 2016 (TCMA), a wide-ranging piece of legislation which covers issues including:

• The procedure for setting tax rates and bands

• How LTT applies to leases (the rent element of newly granted residential leases is exempt from tax, unlike under SDLT - so LTT is only payable on the lease premium)

• How LTT is to be calculated, and available reliefs

• Specific measures to tackle devolved tax avoidance

• How the Act applies to specific persons and bodies. Eg. where a company buys residential property it will be liable to pay the residential higher rates. Trusts buying residential properties may also have to pay the residential higher rates

• The process for making a LTT return and payment of the tax (the return can be done online if registered on the Welsh Government website)

• Taxpayers’ duties to make payments (and penalties and interest in certain circumstances)

• When payment of higher rates on some residential property transactions is required (a higher LTT rate is normally payable for purchases of additional residential properties - usually 3% on top of the main residential rates)

The current LTT threshold is £180,000 for residential properties, and £150,000 for non-residential properties. For purchases above the relevant threshold, the LTT rate and band depend on the type of transaction.

Potential stamp duty refunds

First time buyers of property under a shared ownership could be entitled to a refund of stamp duty land tax, following the announcement in the Autumn 2018 budget of a new stamp duty relief which gives buyers of shared ownership property similar relief to that already enjoyed by other first time buyers.

Under the new rules, first time buyers of shared ownership property will not be liable to pay stamp duty on the first £300,000 of the purchase price of a property costing up to £500,000. This is retrospective with effect from 22 November 2017, so any buyers in these circumstances who bought on or before that date can apply for a stamp duty refund.

However, note that this affects only buyers in England and Northern Ireland.

 

 

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