Are you selling a shared ownership home? Do you know whether or not you’ll need to plan for Stamp Duty Land Tax (‘SDLT’)? Read on.
This is the third of three articles. All three articles were written by Sean Randall (a stamp duty expert and partner at Blick Rothenberg) in collaboration with Zahrah Aullybocus (a specialist consultant solicitor, and Shared Ownership Resources sponsor).
In the first article we explained what homebuyers need to know about SDLT when buying a shared ownership home. The second article covered what happens when an owner of a shared ownership home staircases (purchases additional shares in their home). This final article explains what SDLT charge arises when selling a shared ownership home.
I staircased to 100% before selling my home: do I need to think about SDLT?
If you staircased to 100% before putting your home on the market, then you’ve already paid all the SDLT you need to pay. That’s one less thing to think about! SDLT is only payable by buyers.
My solicitor says that I must pay stamp duty on staircasing to 100% in conjunction with my sale of the property. Why?
In short, I don’t think this is correct. Generally speaking SDLT won’t be charged on staircasing to 100% in conjunction with a sale of the property.
Owners can claim stamp duty “sub-sale relief” (NOTE TO SOLICITORS: enter code 34 at question 9 of the return) to provide a complete exemption from SDLT provided that they exchange contracts to sell the property before they staircase and there is no time delay between the staircasing and sale. It should not matter whether the lease is of a flat or house and, consequently, whether the owner acquires and sells the freehold reversion. HMRC appear to accept that the relief is available and can be claimed.
NOTE TO SOLICITORS:
Unfortunately, HMRC’s online guidance manual does not cover this point. Sean’s view is consistent with a “purposive interpretation” of the legislation applied to the facts viewed realistically. Sean expects HMRC’s guidance to be updated at some point to confirm that in principle they accept that the relief is available in these circumstances. Solicitors should consider seeking specialist advice or request HMRC to confirm their view of the legislation on specific facts).
I own 40% but I’m staircasing to 50% as part of the selling process: how is my SDLT calculated?
SDLT is not payable as the staircasing is under 80%.
What happens if I sell some of my shares back to the housing association (reverse staircasing?
That is for the housing association’s solicitors to deal with. A ‘reverse’ staircasing transaction essentially means you are selling shares back to the housing association and this is quite rare these days due to lack of funding. The owner would certainly not have any SDLT to pay as the tax is payable on acquisitions, and the only person making an acquisition in this case would be the housing association.
Is stamp duty payable on a transfer of equity as part of a staircasing transaction?
Possibly. Where you are adding or removing someone from the legal title (or adjusting the shares in which the owner(s) hold the property beneficially) without selling the property this is referred to as a ‘transfer of equity’. Each transaction will need to be considered by the solicitor acting to determine how much is being paid (either by way of mortgage or savings or other source of funds) and who it is being paid to.
By way of general example, if you are transferring a share of the property to your partner/spouse, then they will generally be treated as assuming half of the mortgage – SDLT will therefore be calculated on half of the mortgage. Where this is being done as part of a staircasing transaction it does get a little complicated. Normally the housing association will not include a partner on the ‘staircasing’ or Memorandum of Staircasing. You will need to speak to your solicitor or a SDLT specialist to ensure you get a calculation to confirm the correct amount of SDLT payable.
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Really interesting piece on something that has been infuriating to find no guidance on. I am in the process of paying stamp duty on a simultaneous staircase & sale which I am sure I don’t need to, but playing it safe and doing so anyway.
Is there any way to reclaim this at a later date? Feels like a lot of shared ownership properties resell at 100% and many have paid stamp duty unnecessarily!
Thanks for your comment, Elliott. I’m pleased the feature was helpful.
Adam Crawford – Partner at Prince Evans Solicitors LLP – has also written about this issue. He says: “… if you are staircasing to 100% and simultaneously selling your property you should not have to pay SDLT as you can claim SDLT sub-sale relief. An SDLT return will still need to be filed with HMRC but no SDLT is payable”. Per the link below.
https://nationalhomebuyingweek.co.uk/stamp-duty-on-shared-ownership/#:~:text=SDLT%20WHEN%20YOU%20SELL%20YOUR%20SHARED%20OWNERSHIP%20PROPERTY&text=However%2C%20if%20you%20are%20staircasing,but%20no%20SDLT%20is%20payable.
You could claim the relief within one year of the completion date only. You should not need to pay the tax if it’s simultaneous. HMRC have said that they will grant relief.
Thanks, I have been looking for guidance on this. I contacted another specialist solicitor and they said that sub-sale relief would not apply in these cases but she expected HMRC to provide some further guidance soon re this situation and allowing an exemption on SDLT. Do you know when this clarification might be published? We own 75% of a property in London and will likely have to put on the open market as those eligible for shared ownership will be unlikely to be able to afford our share. We therefore have to simultaneously staircase to 100% to sell and would be looking at a bill of almost £20k for stamp duty. Really hope we don’t have to pay this!
Thanks for your query, Kat. Sean has commented as below. Have you already contacted the HMRC Helpline? If not, you could call them to confirm. https://www.gov.uk/government/organisations/hm-revenue-customs/contact/stamp-duty-land-tax
If you’re considering a simultaneous sale and staircasing transaction, you might find the feature below helpful. It was written by specialist shared ownership solicitor (and Shared Ownership Resources sponsor) Zahrah Aullybocus,
https://www.sharedownershipresources.org/an-expert-on/selling-a-shared-ownership-flat-simultaneous-sale-and-staircasing/
In my view, relief is available. This is a reasonable interpretation of the legislation – in fact it’s the better view in my opinion. HMRC accept this. You could seek clearance or instruct a specialist like me to contradict your lawyer’s view. The tax is self-assessed – in other words, it is your prerogative to claim the relief or not.
An increasing number of legal firms are flagging up the issue of shared owners being misadvised when it comes to SDLT on simultaneous sale and staircasing transactions.
For example, in the feature below, Penningtons, Manches, Cooper say: “There are, unfortunately, many horror stories of sellers having to pay thousands of pounds in SDLT essentially to sell their property where sub-sale relief could have been claimed”.
https://www.penningtonslaw.com/news-publications/latest-news/2022/stamp-duty-on-shared-ownership-property-explained
Hello, a friend of mine is thinking about buying a shared ownership house and wants to know if he can make some extra salary sacrifice pension contributions so that he stays below £90k.
Will he be eligible for the program?
I think he will as his P60 will show an income below £90k but I never found an answer for that.
Hello Felipe, Thanks for your query and apologies it has taken so long to respond. It took me a while to find out!
Homes England’s Capital Funding Guide says: ‘3.1.2. In order to be eligible to purchase a Shared Ownership home applicants must have a gross household income of less than £80,000 and be otherwise unable to purchase a suitable property for their housing needs on the open market’.
“Gross’ means before deductions so the answer to your question seems to be that your friend would not be eligible unless his gross income dropped below £90k (in London). Deductions would only be taken into account when assessing affordability (as opposed to eligibility criteria).