Tax 7: Stamp Duty Tax

Question 1

When is stamp duty tax due?

Answer 1

Return
- due 14 calendar days after completion
- still necessary if payment is not due

Payment
- due 14 calendar days after completion

Question 2

Is stamp duty only due if property was paid for in money?

Answer 2

No. Tax is based on consideration exchanged for property (including VAT if applicable)

Can include
- value of work given in consideration
- value of other property given as consideration
- amount left on a mortgage taken over by transferee

Consideration in Shares
- if land/building are transferred to company in exchange for shares (eg. incorporation)
- transaction deemed to be made at market value

Question 3

What are exempt transactions for Stamp Duty Land Tax?

Answer 3

• property transferred as gift
• property transferred to a spouse/former spouse under divorce proceedings
• property under assent
• property transferred under a variation of a will changing the beneficiary entitled to the property within 2 years of death

Question 4

What are the penalties of late payment of SDLT or late return form?

Answer 4

payment
- interest may be charged on SDLT

Late land transaction form
- up to 3 months late = £100 penalty automatically imposed
- over 3 months late = £200 penalty automatically

Question 5

How much is SDLT?

Answer 5

Exact figures given in exam
- uses bracket system

Additional Residential Purchases
- if second+ home or buy to let is bought
- additional 3% charged on each band (including nil rate bracket)
- only if transaction is over £40k

Question 6

How is SDLT taxed on leases?

Answer 6

Only on new leases

Two calculations
- one for lease premium
- one for net present value (given in exam)

Question 7

What reliefs are there for SDLT?

Answer 7

Relief for Purchase of first residence

Linked Transactions Relief

Question 8

How does SDLT Relief for Purchase of first residence work?

Answer 8

Applies if buying first property as main or only residence for consideration up to £500k
- 0% tax on first £300k
- 5% tax on remainder

Question 9

How does SDLT Relief for linked transactions work?

Answer 9

For when purchaser of residential property acquires more than one dwelling via linked transactions (for example a building with multiple flats)
- remember the additional 3% increase on each level as buying additional residential homes

Paying Tax on each unit
- can pay tax on each unit separately using the mean consideration (total consideration divided by number of dwellings)
- plus the 3% on each as buying additional residential transactions

Non-Residential Property Tax
- if buying 6+ residential properties as linked transactions can choose to apply non-residential property rates
- will not pay the 3% for buying additional residential transactions
- cannot apply above rule of paying tax on units separately