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Stamp Duty Land Tax

Stamp Duty Land Tax - Do you really need to pay it!

Stamp Duty Land Taxes (SDLT) are payable on land, property and shares. The tax applied will depend upon the type of transaction involved.

SDLT is a tax on transactions, not documents. When you buy a property or land, you must fill in a land transaction return (SDLT1) and send it to Her Majesty Revenue and Customs (HMRC). Your conveyancer or solicitor will normally complete the return for you as part of handling the transaction. But legally, you are responsible for the information submitted.

Once the return has been processed and the appropriate amount of tax has been paid, a 'land transaction return certificate' (SDLT5) is issued (this replaces the old impressed stamp.) You'll need this certificate for the Land Registries in UK and Northern Ireland, or for the Registrars of Scotland when applying for registration of title or documents.

Reliefs

Stamp Duty is currently nil for first time buyers until 25th March 2012

SDLT is not charged on residential transactions in 'designated disadvantaged areas' if the price of the property doesn't exceed £150,000.

So how does the avoidance scheme work

It achieves a Minimum 85% Reduction in Stamp Duty Land Tax Residential Property Acquisitions.

Who is it for?

There are two schemes. The first is for Husbands and wives (or members of registered civil partnerships) wishing to purchase freehold or long leasehold residential property over £500,000. This scheme only applies to the persons mentioned above and only for residential property in the UK.

The second is for unmarried couples or two or more family members wishing to purchase freehold or long leasehold residential property over £500,000. This scheme only applies to the persons mentioned above and only for residential property in the UK.

Key Points

  • Needs to be implemented prior to exchange of contract,
  • Can be applied to either freeholds or long leaseholds,
  • No deterioration in lenders position,
  • For commercial protection reasons client must use a solicitor chosen from a specific panel.

Fee Structure

The typical fees are generally a percentage of the Property Value:

£500,000 to £5,000,000 - 1.5% (with a min fee of £10,000),
£5,000,000 to £10,000,000 - 1%,
Thereafter - By agreement.

Risks

This tax planning is legitimate in both principle and practice. Full disclosure will be made in each case, but it may nonetheless be challenged by the HMRC.

In the event a challenge is successful, the benefit of Counsels' opinions means that it is unlikely that penalties will be levied. The only likely costs over and above the SDLT is an amount of interest at official rates calculated from the due date to the date actually paid. Counsels Opinion has been given by Patrick Way, Gray's Inn Chambers, Gray's Inn (March 2007).

So as you can see from the figures, there is potential for real savings, but please remember that these schemes are not for the faint hearted and HMRC may not accept the case. If this does occur, you will end up paying more that just stumping up the cash in the first place!