LAND TAXES

Question 1

What is the basis of charge for:
RESIDENTIAL FREEHOLD PROPERTY (SDLT) - where they are first time buyers?

Answer 1

• Must be their main residence.
• The purchase price must be no more than £625,000.
• They do not pay ANYTHING up to £425,000.
• And they pay 5% on the portion from £425,000 - £625,000/.

Question 2

What is the basis of charge for:
RESIDENTIAL FREEHOLD PROPERTY (SDLT) - where they are NOT first-time buyers?

Answer 2

• First 250,000 @ 0%
• Next chunk - 250,000 - 925,000 @ 5%
• Next chunk 925,000 - 1,500,000 @ 10%
• The remainder @12%

Question 3

What is SDLT payable on?

Answer 3

Land (which includes fixtures) - NOT chattels.

May be possible to save SDLT by apportioning part of the purchase price to chattels - any apportionment must be a fair value or a fraud on HMRC is being committed.

Question 4

What is the basis of charge for non-residential or mixed use freehold property (SDLT)?
(Commercial property)

Answer 4

• First 150,000 @ 0%
• Next chunk £150,000 - £250,000 @ 2%
• Next chunk over £250,000 @ 5 %

Question 5

If VAT is charged - what is SDLT payable on?

Answer 5

The VAT-inclusive sum.

Question 6

How is SDLT paid?

Answer 6

It is paid to HMRC - usually online by bank transfer - accompanied by a form called SDLT1 which provides the necessary details of the transaction.

Question 7

Within how many days must SDLT be paid?

Answer 7

14 days - if it is not paid the transfer of the property to the buyer - will not be registered by the Land registry.

Also penalties and interest.

Question 8

What is a main difference between LTT (Wales) and SLDT (England)?

Answer 8

• No relief for first-time residential buyers from LTT.
• Rates at which LTT is charged is different too.
• within 30 days of completion to return the land transaction return to the Welsh Revenue Authority whereas 14 days to HMRC.

Question 9

What are the LTT rates for those buying residential freehold property?

Answer 9

• First £225,000 @ 0%
• Next chunk £225,000 - £400,000 @ 6%.
• Next chunk £400,000 - £750,000 @ 7.5%
• Next chunk £750,000 - 1,500,000 @ 10%.
• Remainder @ 12%.

Question 10

What are the LTT rates for non-residential or mixed use freehold properties?

Answer 10

• First 225,000 @ 0%
• Next chunk 225,000 - 250,000 @ 1%
• Next chunk 250,000 - 1million @ 5%
• Remainder over 1m @ 6%

Question 11

If VAT is charged, what is LTT payable on?

Answer 11

The VAT-inclusive sum.

Question 12

Within how many days does LTT need to be submitted? And to whom?

Answer 12

Within 30 days of completion to Welsh Revenue Authority.

Question 13

WHEN IS PRIVATE RESIDENCE RELIEF APPLICABLE FOR CGT?

Answer 13

When it is the sale of the individual’s dwelling house used as their only or main residence.

The seller MUST have occupied the dwelling house as their main residence throughout the period of ownership.

Certain periods of absence are allowed - e.g., if owner is an employee and has to live abroad or in service accommodation as part of their job.

Garden of more than 0.5 hectares - gain on the excess is chargeable to CGT unless the seller can demonstrate the extra garden was necessary for the reasonable enjoyment of the house.

Question 14

How does private residence relief work if they have more than one property?

Answer 14

They can elect which property will qualify for PRR to HMRC.

Question 15

Is private residence relief (CGT) available for trustees?

Answer 15

YES - available to trustees if the property is occupied by a beneficiary as their principal residence.

Question 16

If you have a garden of 0.6 hectares can you claim private residence relief for CGT?

Answer 16

Garden of more than 0.5 hectares - gain on the excess is chargeable to CGT unless the seller can demonstrate the extra garden was necessary for the reasonable enjoyment of the house.

Question 17

If part of your house is used for business purposes - how does this affect private residence relief for CGT?

Answer 17

The relief may be lost on any part of the house used exclusively for business use.

Question 18

Who is a taxable person for VAT?

Answer 18

Anyone who earns over £85,000.

Question 19

When and how is VAT collected?

Answer 19

VAT is collected by HMRC from each supplier.
It is collected at the end of each VAT period (usually every 3 months) by the supplier completing a VAT return to HMRC online.

Question 20

If your business is exempt e.g., you make exempt goods and services e.g., insurance, banks and building societies - can you register for VAT and can you recover any input tax?

Answer 20

No you cannot register for VAT.
No you cannot recover any input tax.

Question 21

What % are standard rated supplies charged at?

Answer 21

20%

Question 22

Are zero rated supplies taxable supplies?

Answer 22

Yes - but they are charged at a zero rate.

Question 23

Do most residential properties involve the payment of VAT?

Answer 23

No - the sale of a new build house by a developer is zero rated so the buyer will not pay any VAT and the subsequent sale of a residential property by a private individual will not be in the course of a business so the seller will not be charging VAT to the buyer in addition to the purchase price.

Question 24

What is considered a new commercial property?

Answer 24

One which is within 3 years from completion of the building.
No option but to charge VAT.

Question 25

Why would a client make an option to tax?

Answer 25

A seller of an old building may want to tax to enable recovery of the input tax incurred in relation to the building e.g., building work costs and professional fees incurred in renovating the building to get it ready to sell.

Question 26

What is a disadvantage of opting to charge VAT?

Answer 26

The seller has to charge VAT on the purchase price - this will not be a problem if the buyer makes taxable supplies and can reclaim the input tax VAT - BUT when the purchase price is increased there will be a real cost to the buyer’s business and the building will be unattractive.

‘VAT sensitive’ financial buyers - the seller will try very hard to avoid opting to tax the supply of the building - if it does so - there may be a detrimental effect on the sale price of the property that can be charged because the potential buyer will seek to claw back some of the irrecoverable input tax VAT by reducing its offer for the purchase price.