Stamp duty land tax (SDLT) transitional rule reclaims

The issue

Each time that there is a hike in SDLT rates buyers have the ‘option’ to apply the lower rates which were in force at the time when any uncompleted contract exchanged. This is a point that conveyancers do not always consider and so purchasers may have unwittingly paid too much SDLT.  It is possible, however, to make a reclaim of the excess SDLT provided this is done within the strict time limit of one year and 14 days.

Transitional rules

The main increase in SDLT rates took place on 4 December 2014. This introduced a banded approach to residential SDLT rates as follows:

  • 0% up to £125,000,
  • 2% for the next £125,000,
  • 5% for the next £675,000,
  • 10% for the next £575,000,
  • 12% on anything over £1.5M
  • (add 3% to all of these if the 3% SDLT surcharge applies)

These rates took over from the old rates which applied a single rate to the whole transaction as follows:

  • 0% up to £125,000,
  • 1% between £125,000 and £250,000,
  • 3% between £250,000 and £500,000,
  • 4% between £500,000 and £1M,
  • 5% between £1M and £2M,
  • 7% over £2M

Example

In October 2014 John exchanged contracts to buy an off-plan apartment in London for £2M. This transaction completed on 10 January 2019 and John was advised to pay SDLT at current SDLT rates (including the 3% surcharge). Therefore he paid £213,750. Under transitional rules this should have been £100,000 (at 5%). Therefore John has until 24 January 2020 to submit an amended return and reclaim £113,750.

Final word

How many ill advised clients are out there who have missed out on the opportunity to pay less SDLT afforded by the transitional rules? Given that there is only one year and 14 days available to amend the return many of these reclaim opportunities will be ‘dead’ but many will have imminent deadlines. Also, similar principles apply to the 3% surcharge which was introduced in 2016……….

 

Search

Sign up for our newsletter

Interested in receiving the latest tax planning ideas?

Sign up to Tax Bites – our weekly update offering practical but effective tax saving tips.

Contact Us

You can use this form to request us to give you a call or if you prefer just leave us a message. Please be sure to leave us a contact number or email address for you and we will get back to you as soon as we can.

Phone
0161 927 9277

Email
office@forbesdawson.co.uk

Address
Fairbank House
Ashley Road
Altrincham
Cheshire
WA14 2DP