In his Budget announcement, the Chancellor said he had listened to feedback when making his decision to apply the tax premium beyond the amateur buy-to-let borrower.
A consultation was carried out by the Treasury which ran from the 28 December to 1 February, attracting 909 respondents. The government said evidence provided by respondents suggesting there would be an ‘adverse and material effect’ on housing supply if large scale investors were charges, was not compelling.
Two exemption options were proposed in the consultation. One was to exempt bulk purchases of properties, the other to exclude investors with portfolios of 15 or more properties.
“Whilst the higher rates may have some effect on off-plan purchases, the government’s view is that the overall effect on housing supply is not material and housing developments will remain attractive for corporate investors as well as potential home owners,” the response read.
“In light of this, the government has decided to apply the higher rates equally to all purchasers without an exemption for significant investors.”
Married couples
Further changes to the government’s initial proposals apply to married couples as one unit.
Married couples living separately, where it is likely to become permanent, will not be treated as one unit for the SDLT surcharge. The government said it had listened to feedback which suggested the originally proposed definition of separation did not account for situations where couples had separated but had chosen not to divorce formally.
Moving home
Loosening of the surcharge criteria has also been applied for people moving from one home to another but struggling to dispose of their old house. It was originally proposed that homeowners be given 18 months to dispose of their previous property. It has now been decided that additional time can be offered to homeowners to help those with ‘difficult circumstances’.
The change was made to help those whose home has been affected by flooding, those going through divorce proceedings and those suffering from ill health. The 36-month time period will commence from 25 November 2015.
Inherited properties
There is also a concession for inherited properties. The government has decided that when applying the higher rates, a small share (50% or less) in a single property which has been inherited within the 36 months prior to the transaction will not be considered as an additional property. This is intended to provide flexibility for purchasers who may find it difficult to dispose of a share in a property quickly.
Restricted use and property renovators
Restricted-use properties will not escape the surcharge however. Properties such as holiday lodges and properties bought by property developers will be subject to the premium.
“Property renovators often target properties that may be desirable for owner-occupiers and they also benefit from the Capital Gains Tax (CGT) system by offsetting any SDLT costs against their CGT charge on sale. The government can confirm that purchases by property renovators will be treated in the same way as purchases made by others.
That is, where a renovator purchases an additional property, the higher rates will apply.”
The receipts collected from the surcharge will be used to support community land trusts in South West England.