Changes to SDLT introduced in England

From the 1st of March 2019, the way that Stamp Duty Land Tax (SDLT) is filed and paid in England has changed. The window for filing a return and paying tax has been reduced from 30 calendar days to just 14 calendar days for some forms of contracts and lease agreements. Failure to meet these new deadlines could result in a £100 fine, rising to £200 after 3 months, with interest payable during this period. Failure to file or pay within 12 months will incur additional penalties up to the full amount that is due.

These changes, which were first proposed in the 2015 Autumn Statement, have been rolled out following a 3 year delay resulting from uncertainties relating to complex transactions. The existing filing and payment window of 30 calendar days was originally intended to be narrowed in the 2016-2017 tax year in an attempt to improve and streamline the current SDLT systems and processes.

This affects any and all purchasers of property and, whilst most purchasers use solicitors and legal conveyancers to file their SDLT returns, it remains the buyer’s responsibility to ensure that their returns are filed and tax paid within the given time frame.

Despite the delay, which occurred so that ‘simplifications’ could be implemented, a number of complexities still remain. One such complexity is the effective date of the 14 day window, which is usually sparked by completion of the transaction but which can be triggered by other events, such as an early tenancy agreement, for example, or through payment of the majority of the buying price. This is typically categorised as 90% or more. Payment of first rent or approved access to property is also valid.

It is important to note that the 30 day filing and payment window will continue to apply for some types of contract and agreement. This includes the extension of an existing fixed term lease, and cases where the filing of a further return is necessary. However, the new 14 day regulation will apply to cases where no tax is due, namely purchases under £125,000, where a return is still required by HMRC.

Preparation is key to effectively managing this change to SDLT. Holiday periods of solicitors, legal conveyancers, tenants, and buyers must be taken into consideration, and is is advised that necessary forms are prepared well in advance where possible so that returns and any payments can be sent to HMRC efficiently upon the effective date in a bid to avoid potential financial penalty. According to HMRC, the majority of SDLT returns and payments are already made within this 14 day window.

The changes to the SDLT filing and payment window will affect contracts and agreements in England only. No changes are expected for Land and Buildings Tax in Scotland or Land Transaction Tax in Wales.

Advice should also be taken early to ensure that the right rate is being applied and you don’t over pay. The rules surrounding when the 3% surcharge applies to residential properties are complex, for example if the property consists of both residential and non-residential property the 3% may not apply, similarly if multiple dwellings are being acquired different rates may apply.

For more information, please contact a member of our tax team.