SDLT on residential property can be very complex, with many traps for the unwary. In addition to tackling challenges such as deciding whether a property is classified as residential or commercial, or the application of Multiple Dwellings Relief, practitioners must be alert to the motives of clients. The additional 3% rate for additional residential properties introduced in April 2016 may tempt clients to be economical with the truth, and the linked transactions and connected parties rules may catch clients trying to split a deal amongst different relatives or associated companies or partnerships.
Like all other taxes, SDLT has to be thought about carefully at the beginning, by someone who understands it, rather than delegated to a junior person to do ‘the form’ at the end. The amount on which the tax is paid may well not be the figure on the transfer, and the taxpayer may not be the transferred, even.
Failing to explain or investigate the situation will leave the conveyancer holding all the risk if HMRC raise an enquiry – and they may easily have four, six or even 20 years to do this, not the nine months you might think. Penalties can be up to 100% of the unpaid tax.
This course will explain:
- What is residential property for SDLT purposes? What questions should you ask?
- What is the ‘deal’ and when might transactions be linked?
- The connected parties conundrum
- What if you suspect the client is being evasive?
- Tax planning - would there be a better way to structure the deal?
- Are SDLT avoidance schemes dead or are there still planning possibilities?
- Company purchases of residential dwellings - the additional rate, the 15% higher threshold and reliefs
- Multiple Dwellings Relief - when does it apply, how do you calculate it and when might it be reclaimed?
- The Additional Rate - single purchases, multiple purchases - what is a main residence?
- The global reach of SDLT with the higher rate - how can you be certain it doesn’t apply?
- Don’t forget ATED (Annual Tax on Enveloped Dwellings)!
- Common problems