1. Property Taxes – Stamp Duty & VAT

2. Stamp Duty Land Tax (“SDLT”)

3. The 3% SDLT Surcharge
Overview
Applies to the purchase of additional residential property
Payable in addition to the usual SDLT
Certain exemptions apply including:
The purchase of a replacement main home;
A property which is partly residential and partly non-residential;
A residential property worth less than £40,000; and
A caravan, mobile home or houseboat.

4. The 3% Surcharge - Pitfalls For The Unwary
Potential Pitfalls
The Couples Trap
Joint purchasers, married couples and couples in a civil partnership may inadvertently be subject to the 3% surcharge when they buy a new home. Joint purchasers (including spouses) are treated as one buyer under the surcharge rules, so if one of the couple already own a property, this could trigger the 3% surcharge.
The Failed Sales Trap
If a new home is bought before the old home has been sold, for example because the sale of the old home falls through but the purchase of the new home still goes ahead, the purchase of the new home will attract the 3% surcharge.
Although HMRC will repay the 3% surcharge provided the old home is sold within three years, funding for the additional cost on the purchase of the new home is frequently an issue.

5. The 3% Surcharge - Pitfalls For The Unwary
Potential Pitfalls
The Parent Trap
If a parent assists their child to buy their first home, for example, and the mortgage company insists on them being named on the title deed, the parent’s existing ownership of their own home will result in the purchase of their child's home being subject to the 3% surcharge in its entirety, despite this being the child’s first residential property purchase.
The Relocation Trap
If a home owner moves to a new area to take up employment and rents out his or her old home, the purchase of a new home in the area they have moved to will attract the 3% surcharge.
This is the case even if the home they have retained is in a different country and, for example, the old home has been retained because they intend to move back there.

6. The 3% Surcharge - Pitfalls For The Unwary
Potential Pitfalls
The Rental Property Trap
If a first time buyer already owns an interest in an investment property (such as buy-to-let) either in the UK or abroad and that investment is worth more than £40,000, the first time buyer will be liable to the 3% surcharge on the purchase of their first home.
The Holiday Home Trap
Many holiday homes are subject to planning restrictions which do not permit their occupation for certain months of the year.
Although such homes cannot be regarded as permanent homes because of these restrictions, they are still treated as second homes for SDLT purposes, and so the purchaser is liable to the 3% surcharge if, as is very likely, they already own another home elsewhere.

7. Client Stamp Duty Refunds - Case Studies
Granny Annexe
A client purchased a substantial property in Surrey which included a granny annexe.
Having reviewed the layout of the property in detail we were able to claim a stamp duty refund for of £50,000.
If any of your clients have purchased a residential property in the last year with a granny annexe or a staff flat, then please get in touch as they may be entitled to a stamp duty refund.

8. Client Stamp Duty Refunds - Case Studies
Land
A client purchased a substantial country home in Sussex which had land of 20 acres which included agricultural land rented by a local farmer.
On reviewing the specific facts of the case, and carrying out a site visit, we were able to obtain a stamp duty refund of £60,000.
If any of your clients have purchased a rural residential property in the last four years with substantial land, then please get in touch as they may be entitled to a stamp duty refund.

9. Client Stamp Duty Refunds - Case Studies
3% Surcharge
A client purchased a property in London as his main home in May 2016 and paid the 3% stamp duty surcharge as he already had a home abroad.
He subsequently sold his overseas home in December 2016, but was not aware that he could reclaim the 3% surcharge.
We were able to reclaim a stamp duty refund of over £80,000.
If any of your clients have purchased a residential property and paid the 3% stamp duty surcharge, then please get in touch as they may be entitled to a stamp duty refund.

10. VAT

11. VAT on Property Alterations
In certain circumstances, a reduced rate of VAT can apply to the cost of residential property alterations.
For example:
The creation of a new dwelling can be Zero rated.
If the number of dwellings is changed in an existing building, or a dwelling that has not been lived in for more than two years is renovated, the building costs can be charged at the reduced 5% VAT rate.
It is very important that a VAT specialist is involved in the property alteration planning process, prior to the appointment of builders, so that the correct VAT treatment is applied.

12. Any Questions?

13. Contact Details
Andrew Shilling Partner Karen Doe Director
London Office Rawlinson & Hunter Eighth Floor 6 New Street Square London EC4A 3AQ T +44 (0)