Did I pay too much stamp duty on an SO resale?

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Daniel Ross* says: “I paid £2,750 Stamp Duty Land Tax (SDLT) when I bought a 60% share of a resale shared ownership flat 7 years ago. But now I’m wondering if I should have paid SDLT at all….? Can you help?”

Sean Randall is a Partner at Blick Rothenberg and a widely acknowledged expert in SDLT. Sean says…..

Sean Randall, Partner at Blick Rothenberg and SDLT expert

You are querying whether you have paid the correct amount of Stamp Duty Land Tax (SDLT) on an SO resale. You have given me the following information about your purchase:

  • 7 years ago, you bought a 60% share of a shared ownership flat with a market value of £425,000.
  • You paid £255,000 for your 60% share.
    • The previous shared owner sold you their 25% share as a resale for £106,250.
    • You simultaneously bought an additional 35% share from the housing association for £148,750.
  • Your solicitor at the time informed you that you should pay £2,750 SDLT. This was calculated – with reference to the thresholds in force at the time – as follows:
    • 0% (zero SDLT) up to 125k
    • 2% SDLT on transactions between £125,000 to £250,000 = £1,250,000 x 2% = £2,500
    • 5% SDLT on £5,000 = £250
  • You are now staircasing to 100%. Based on information from your current solicitor, you wonder if the original SDLT calculation was incorrect for the following reasons:
    • You paid the previous shared owner £106,250 for their 25% share. This was below the £125,000 threshold (at the time of your purchase) for paying SDLT.
    • HMRC guidance states that SDLT is not payable on any staircasing transaction unless it takes the owner’s share above 80%.
    • You paid the housing association for an additional 35% share taking your total share to 60%. But this staircasing transaction at the point of purchase did not take you over the 80% threshold for paying SDLT.

In short, you wonder if you should have paid SDLT at all when you bought your 60% share?

Long answer, short

Normally, tax legislation is sensitive to interpretation and reasonable views differ. In this case, it’s totally black and white.

Hands holding paperwork
Image: Freepik

There’s no doubt at all that you should not have paid any SDLT when you bought your 60% share. I explain why below.

Stamp duty on an SO resale – Linked transactions

You purchased your 60% share from two different vendors – the previous shared owner and the housing association. Similarly, there were two separate transactions – the sale transaction and the staircasing transaction. The key point here is that the transaction to purchase a 25% share from the previous owner and the staircasing transaction to purchase a 35% share from the housing association were not linked.

Consequently, the staircasing price should not have been added to the lease purchase price (i.e. the 25% share) to determine SDLT due on the purchase of the lease.

You are therefore correct in suggesting that your purchase of the 25% share was under the threshold for paying SDLT (zero SDLT applied).

Stamp duty on an SO resale – Exempt staircasing transactions

You are also correct in suggesting that the staircasing transaction was exempt as your total share was below the 80% threshold for paying SDLT.

Your options – HMRC

Sadly, you are out of time to reclaim overpaid tax from HMRC as the deadline is four years.

Your options – Make a complaint to the law firm

In my view, you should contact the law firm who advised on the purchase of your 60% share to explain why you now believe you overpaid £2,750 SDLT per their advice, and to request reimbursement. You should also seek interest on that payment.

Most solicitors work within a SRA-regulated law firm. You can use the SRA Register to check whether a law firm is regulated by the SRA. If so, you can expect to find information on the firm’s website about their complaints process.

  • Name has been changed.

This article represents Sean’s opinion in respect of this query. Please seek independent professional advice if you have queries regarding your own SDLT payment as the specifics of your situation may differ from the scenario outlined above. For example, the SDLT liability and the advice would be different if the seller had undertaken a simultaneous sale and staircasing transaction.

We hope this content will help you have an informed conversation with your own solicitor or tax advisor.

Featured image: rawpixel.com on Freepik.

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