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SDLT Holiday - Deadline Looming

27 February 2021

With the end of the Stamp Duty Land Tax holiday on the horizon, Caroline Turner, Real Estate Partner, discusses how it works and what happens next.

What Is SDLT?

Stamp Duty Land Tax (“SDLT”) is a tax payable to HMRC, by a purchaser, after completion of the purchase of a property or land over a certain value in England and Northern Ireland.

What Is The SDLT Holiday?

In July 2020, UK Chancellor Rishi Sunak announced that home buyers will not have to pay SDLT on homes worth up to £500,000, provided that the home being purchased is the only residential property to be owned by that buyer. Purchasers of additional dwellings also benefit from the SDLT holiday and pay a reduced rate during that period.

At the time of introduction, the purpose of the SDLT holiday was to bolster an uncertain housing market and ultimately the UK economy during the coronavirus pandemic. Seemingly, the first part of this goal has been achieved as the residential housing market in the UK is currently booming.

This SDLT holiday is due to end on 31 March 2021 and this is just round the corner. While the end of the SDLT holiday is not far away, depending on your circumstances, there may still be time to consider taking advantage of the tax break.

HMRC website provides a helpful SDLT calculator which will assist when considering your options regarding transactions before and after 31 March 2021.

What Happens When The SDLT Holiday Ends?

There will be buyers who, for various reasons, are unable to complete on a purchase before the end of the SDLT holiday on 31 March 2021.

After that date, the standard rates of SDLT, which is stepped, will apply. This can also be calculated on HMRC’s SDLT calculator.

It may be possible to mitigate issues arising that could potentially cause a transaction to complete after 31 March 2021. Whether this is the case, however, will depend on individual circumstances and so at this stage there is no blanket panacea.

For example, if a buyer and seller cannot make the deadline because the seller is unable to move out of the property in time, then there may be a possibility that the seller takes a temporary lease back of the property.

Alternatively, there may be some scope for negotiating between the parties as to reduction in the purchase price so that the buyer and the seller can ‘share’ the obligation of the new SDLT.

What most property professionals are hoping for is an extension to the SDLT holiday, although the general consensus in the industry is that an extension is looking unlikely. That being the case, it is still possible to take advantage of the SDLT holiday, given the right circumstances.

This article is provided by Burlingtons for general information only. It is not intended to be and cannot be relied upon as legal advice or otherwise. If you would like to discuss any of the matters covered in this article, please contact Caroline Turner or contact us using the contact form below.

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