PLP - Taxation

Question 1

Basis of SDLT and LTT

Answer 1

Tax payable on the purchase price of the property by someone purchasing an interest in land or building

Question 2

Stamp Duty Land Tax (SDLT) - England

Answer 2

Rates:
- Residential: 0% up to £125,000 then 2% up to £250,000 then 5% up to 925,000.

• Non-residential: 0% up to £150,000.
• Commercial leasehold: premium and net present value assessed
• Residential Leases: SDLT assessed on the premium= lump sum purchase price. If the total rent over the (“net present value”) is more than £125k, additional SDLT of 1% on the portion over £125k is payable

Timing: SDLT must be paid to HMRC within 14 days of completion

Question 3

Land Transaction Tax (LTT) - Wales

Answer 3

Rates:
- The first £225,000 is 0% tax for LTT

Timing: LTT must be paid to the Welsh Revenue Authority (‘WRA’) within 30 days of completion

Question 4

SDLT - Exemptions

Answer 4

• Property transferred as a gift
• Property transferred to a spouse or former spouse upon divorce
• Property transferred under a variation of a will changing the beneficiary entitled to the property within 2 years of death

Question 5

SDLT - Reliefs

Answer 5

First-time buyer relief (residential freehold)

• No SDLT up to £300,000
• 5% SDLT on the portion from £300,001 to £500,000
  If the price is over £500,000, you cannot claim the relief

Question 6

Effects of charging VAT

Answer 6

Effects
* Standard rate of 20% must be charged on the sale or lease

• Purchase of commercial building less than 3 years old is a standard rated supply- means that the purchaser must pay 20%
• Any inputs relating to the supply may be recovered including heating costs, cleaning and repairs

Question 7

Capital Gains Tax

Answer 7

When a person sells their home, they will generally NOT have to pay capital gains tax (CGT) on the gain realised from the sale due to the application of Private Residence Relief

Timing: If a seller has to pay CGT, then it must be paid within 60 days from the completion date

Question 8

CGT - Private Residence Relief

Answer 8

No CGT is payable if:

• the dwelling has been their only or main residence
• they have not been absent during the period of ownership
• no part of their home has been used exclusively for business purposes

Periods of absence can be deemed to be periods of occupation

• The last 9 months of ownership will be deemed occupied, regardless of whether it is, as long as it is the owners main place of occupation
• Periods of absence falling between periods of actual occupation will count
  o Absence for any reason, up to 3 years
  o Time working overseas
  o Time working elsewhere in the UK, up to 4 years