Property buyers are required to pay Stamp Duty Land Tax (SDLT), usually on completion of a purchase.
Under the SDLT regime, purchasers have 14 days from the effective date of a transaction to file an SDLT Return and pay any duty due. The SDLT liability can be calculated in advance of completion, along with preparing and signing the return in readiness for filing with HMRC after completion has taken place.
The buyer’s solicitor will normally help to calculate the duty payable and submit the return and payment on their behalf. However, the information on the SDLT return and the subsequent duty calculation is a self-assessment tax and purchasers are responsible for the accuracy of their own returns.
In different circumstances a buyer may be able to claim a tax relief, or be required to pay a higher rate.
First Time Buyers may be eligible for SDLT relief depending on their circumstances. A First Time Buyer, for the purposes of SDLT, is defined as an individual or individuals who have never owned an interest in a residential property in the United Kingdom or anywhere else in the world, and who intends to occupy the property as their main residence. To qualify for First Time Buyer relief, all parties to the purchase must meet the definition.
Where the property you are buying results in you owning two or more properties, a higher rate of SDLT may be payable. You will usually be classed as having a ‘major interest in a dwelling’ i.e., owning another property for the purposes of SDLT, if you have an interest in another property with a value of £40,000 or more. For SDLT purposes a married couple or civil partners are classed as one unit by HMRC.
If you are not present in the UK for at least 183 days (6 months) during the 12 months before your purchase, you are not a UK resident for the purposes of SDLT and a surcharge may be payable.
Further information regarding the rules and rates relating to SDLT, as well as the Government’s SDLT calculator, can be found here: https://www.gov.uk/stamp-duty-land-tax.
A fee is payable to HMRC to submit a return and a solicitor will normally pass this on to their buyer client. This fee is separate to any duty owed. A return must be filed even if no duty is payable.
Failure to submit a return within the 14 day deadline can result in a fine. Where an understatement of SDLT results from a mistake and that mistake is careless or deliberate, penalties of up to 100% of the tax understated can apply. It is also a criminal offence to give false or incomplete information on a return. If your circumstances relating to SDLT change at any time during a transaction, you should inform your solicitor immediately.