Property Taxation

Question 1

Who pays Stamp Duty Land Tax / Land Transaction Tax?

Answer 1

Buyer of residential or non-residential property

Question 2

How is SDLT charged for residential property?

Answer 2

First time buyer relief: if intend to occupy as main residence & purchase price is no more than £625,000

The rates otherwise are:

Less than £250k - 0%
So much as exceeds £250k but does not exceed £925k - 5%
So much as exceeds £925k but does not exceed £1.5m - 10%
Remainder exceeding £1.5m - 12%

Question 3

What is first time buyer SDLT relief?

Answer 3

A first time buyer can claim a relief on the first £425k if they intend to occupy the property as their main residence & the purchase price is not more than £625k

• First £425k - 0%
• £425,001 - £625k - 5%

Question 4

What are the rates of SDLT for residential property?

Answer 4

Less than £250k - 0%

So much as exceeds £250k but does not exceed £925k - 5%

So much as exceeds £925k but does not exceed £1.5m - 10%

Remainder exceeding £1.5m - 12%

Question 5

Does SDLT include chattels?

Answer 5

No - payable on land only

If sale involves valuable chattels, can save SDLT by apportioning part of purchase to chattels

Question 6

What is the SDLT rate for non-residential freehold property?

Answer 6

Less than £150k - 0%

So much as exceeds £150k but does not exceed £250k ⇒ 2%

SO much as exceeds £250k ⇒ 5%

Question 7

How is SDLT paid?

Answer 7

Sending SDLT1 form to HMRC within 14 days of completion

Question 8

What happens if SDLT is not paid?

Answer 8

Transfer of property to buyer will not be registered by the Land Registry

Question 9

What is the basis of charge of LTT for residential property?

Answer 9

Less than £225k = 0%

So much as exceeds £225k but does not exceed £400k = 6%

So much as exceeds £400k but does not exceed £750k = 7.5%

So much as exceeds £750k but does not exceed £1.5m = 10%

The remainder exceeding £1.5m = 12%

Question 10

Is there any relief available for first time buyers in Wales?

Answer 10

No

Question 11

What is the basis of charge for LTT for non-residential freehold property?

Answer 11

Less than £225k :: 0%

So much as exceeds £225k but does not exceed £250k :: 1%

So much as exceeds £250k but does not exceed £1m :: 5%

So much as exceeds £1m :: 6%

Question 12

How is LTT paid?

Answer 12

Land transaction return submitted to Welsh Revenue Authority within 30 days of completion

Question 13

Who pays Capital Gains Tax in property transaction?

Answer 13

The seller - but usually will be able to benefit from the principle private dwelling house exemption

Question 14

What is the principle private dwelling house exemption?

Answer 14

A seller of residential property does not have to pay CGT if it is the sale of the dwelling house used as their only or main residence throughout the period of ownership

• If have more than one residence, can choose which one qualifies for the relief
• Relief may be lost on any part of the house used exclusively for business use
• If garden of >0.5 hectares, gain is chargeable unless seller can demonstrate extra garden necessary to reasonable enjoyment of the house

Question 15

What three questions should be asked when seeing if a seller qualifies for the principle private dwelling house exemption?

Answer 15

(i) Is it the only or main residence throughout the period of ownership?

(ii) Is the garden more than 0.5 hectares?

(iii) Has any part of the house been used exclusively for business use?

Question 16

What is VAT?

Answer 16

Tax on ‘taxable supplies’ ie certain goods or services provided by the taxable person in the course of business

Question 17

What is the difference between output tax & input tax?

Answer 17

Output tax: VAT charged by the supplier on its goods or services (ie. its output)

Input tax: VAT paid by customer receiving the goods or services

Question 18

Is the sale of a new build residential house by a developer a taxable supply?

Answer 18

Yes, but zero rated

Question 19

What is the VAT rate for the supply of construction services?

Answer 19

Standard rated (ie. 20%)

Question 20

What is the VAT rate for the supply of professional services? (eg. architect, surveyor)

Answer 20

Standard rated (ie. 20%)

Question 21

What is the VAT rate for the sale of a ‘new’ commercial building?

Answer 21

Standard rated (ie. 20%)

‘New’ = less than 3 years old

Question 22

What is the VAT rate for the sale of an ‘old’ commercial building?

Answer 22

Exempt, subject to option to tax

‘Old’ = more than 3 years old

Question 23

What is the VAT rate for the grant of a lease?

Answer 23

Exempt, subject to option to tax

Question 24

What is the VAT rate for the sale of a greenfield site?

Answer 24

Exempt, subject to option to tax

Question 25

What is the VAT rate for insurance & financial suppliers?

Answer 25

Exempt ie. will be unable to recover VAT if buying a property where seller has exercised option to tax

Question 26

What is an option to tax?

Answer 26

Turns an exempt supply into a taxable supply

Question 27

When will a seller choose to opt to tax?

Answer 27

To recover input tax they have paid in relation to the sale

Question 28

Will a commercial buyer be able to recover the VAT paid if a seller exercises their option to tax?

Answer 28

Yes - unless the buyer makes VAT-exempt supplies only (eg. insurance, financial supplies)

Buyers making exempt supplies will resist seller opting to tax or seek compensatory reduction in purchase price