Autumn Statement and Spending Review 2015: extra stamp duty land tax charge for buy to lets and second homes

The announcement was part of the Autumn Statement and Comprehensive Spending Review.

John Christian, a property tax expert at Pinsent Masons, the law firm behind Out-law.com said: "This is presumably designed to moderate, or cash in, on the buy to let boom - the measure is forecast to raise £625m in 2016/17 -  and also to apply to second homes. Combined with the announced acceleration of CGT payments on disposal and the restriction on interest relief announced in the July 2015 Budget, there will be a significant increase in the tax contribution from the buy to let sector".

The higher rate will not apply to corporates and funds making 'significant' investment in residential properties with a consultation to follow on whether 15 residential properties is an appropriate limit.

"The intention is not to block institutional investment in residential but, as was found in relation to the annual tax on enveloped dwellings (ATED), a very broad scope of charge combined with exemptions runs the risk of catching unintended structures. Residential SDLT is now a very complex area made more difficult by the uncertainty around what is 'residential' property and it is to be hoped HMRC will take forward clarification and, if needed, legislation in relation to this definition," Christian said.

Another measure aimed at second home owners and at non-residents owning UK property is a proposal to bring forward the date when capital gains tax has to be paid on a sale of residential property. From April 2019 a payment on account of any CGT due will need to be made within 30 days of completion of the disposal. The current due date for payment is considerably later – 31 January following the end of the tax year in which the disposal is made. This will not affect properties where there is no CGT to pay such as homes qualifying for private residence relief.

John Christian said "The policy costings document notes that the tax base for this change will be individuals and trusts, though this is not said in the Autumn Statement summary. This will accelerate the payment of tax on sales of buy to let properties and also in relation to the CGT charge applying to non-residents on the disposal of residential property".

Since 6 April 2015 non-UK residents disposing of UK residential property have been liable to pay capital gains tax on any gain arising after that date. They are obliged to file a return within 30 days of completion of the transaction and to pay the tax within that period unless they already file a UK self assessment tax return, in which case the normal CGT payment date applies.

Osborne also announced that that the government will extend the reliefs available from the annual tax on enveloped dwellings (ATED) and the 15% higher rate of SDLT to equity release schemes, property development activities and properties occupied by employees. It is intended that the changes will take effect from 1 April 2016

John Christian said "It is good that concerns around the exemptions, particularly in relation to property development, have been acted upon."

From 1 April 2013, ATED has been charged on high value UK residential properties owned by 'non-natural persons', such as companies.  The amount of ATED payable depends on the value of the property, calculated either according to its value on 1 April 2012, or its subsequent purchase price. Since 1 April 2015 it has applied to properties valued at more than £1 million and it will apply to properties valued at over £500,000 from 1 April 2016.

A 'non-natural person' has to pay a higher rate of SDLT when it purchases UK residential property.  From 20 March 2014, a flat rate of 15% rate applies where the consideration exceeds £500,000.

Another SDLT change announced is to reduce the SDLT filing and payment period from 30 to 14 days in 2017/18, as part of wider compliance process changes which will be subject to consultation.

John Christian said "The net financial benefit of the reduced filing period looks to be a one off contribution of around £100m in 2017/18. The announcement of a consultation on other changes to the filing and payment process suggest HMRC perhaps have other more contentious proposals in mind."

The Autumn Statement document contains further detail on the previously announced SDLT seeding reliefs for Property Authorised Investment Funds (PAIFs) and Co-ownership Authorised Contractual Schemes (CoACSs) which will take effect from Royal Assent to the Finance Bill 2016.

The relief will be subject to the fund having assets of £100m value and having either 10 non-residential or 100 non-residential properties which is consistent with the approach in the consultation process to limit the relief to genuine investment. There will also be a seeding period of 18 months and a 3 year clawback period. Further detail will be in the Finance Bill 2016 draft legislation.