SDLT exemption for when employer buys employee’s house!

Attempting to relocate a key employee can often run the risk of losing that employee altogether. What can appear to be a straightforward decision for a business is rarely the same for an employee, who could be faced with the dilemma of either having to uproot their family or quit their job.  Having a guaranteed sale and price agreed for their property, and breaking out of a property ‘chain’, can make the process of relocation much smoother and decrease the chance of the employee staying put and getting another job.

 

The question

We were recently approached by a company who wanted to buy a house from their employee due to relocation, but were concerned about the 3% SDLT additional surcharge levied on companies purchasing residential property.

 

The answer

Not only were our client’s initial concerns about a surcharge unfounded, but we were able to advise them that in fact the whole transaction would be exempt from SDLT altogether!

 

The legislation

According to the Finance Act 2003 Sch 6A 5(2), a company can acquire a dwelling from an employee exempt from charge providing the following conditions are met:

  1. The property must have been the employee’s only or main residence at some point in the 2 years preceding the acquisition.
  2. The acquisition must be made in connection with a change in residence resulting from a relocation of employment.
  3. The consideration for the acquisition must not exceed the market value of the property.

There is also a fourth condition which requires that the area of land acquired must not exceed a permitted area, however, in general, normal residential properties should qualify for full relief.

 

It’s not just existing employers that can benefit!

Whilst there are no caveats surrounding how long an employee needs to be employed prior to the acquisition, interestingly, this exemption isn’t just restricted to existing employers!  An ‘employer’ can also include a prospective employer!

 

Final word

An obvious question is what would the employer want with the employee’s property? In most cases we envisage that the employer would simply put the property on the market and therefore they would effectively be taking on the risk of a lengthy and difficult sale (which was after all the intention!).

 

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