Reading: Law firm comments on HMRC updated guidance

Solicitor Julian Spence, in Blandy & Blandy LLP’s leading property team, looks at the Government’s updated guidance on the 3% SDLT surcharge for purchases of additional residential properties.

With effect from April 1, 2016, HMRC introduced the 3% surcharge for SDLT above the standard SDLT rate for the purchase of additional residential properties for £40,000 or more. This was intended to deter buy-to-let landlords with the intention of making homes more affordable for first-time buyers. Unfortunately, it was not always clear the circumstances in which the 3% surcharge was to apply.

HMRC therefore recently published updated guidance on the 3% SDLT surcharge for acquisitions of additional residential properties.

The updated guidance provides clarification of HMRC's position on various different kinds of residential properties and property transactions such as student accommodation, mixed-use property and lease extensions. The guidance also contains a number of examples of when the surcharge will and will not apply as the case may be. The updated guidance from HMRC is helpful.

It is a pity that HMRC will seek to apply the surcharge to extensions of leases of an individual's only or main residence if the individual already owns an interest in another dwelling, even if the second dwelling was acquired before the introduction of the surcharge on 1 April 2016 and even if the second property is located abroad. This seems to be unfair and at odds with the intention of the surcharge. However, it arises from a strict interpretation of the legislation.

It is also disappointing that HMRC has not provided any clarification, or examples, on how to correctly calculate SDLT when a higher rates transaction is linked to a non-higher rates transaction.

It remains to be seen whether the legislation will be amended in due course.