The Chartered Institute of Taxation has called on government to introduce an exemption from the stamp duty surcharge for parents buying a home for their child to live in.
The government has been consulting on plans to charge an extra three per cent stamp duty on the purchase of ‘additional residential properties’ worth more than £40,000, from 1 April 2016.
Although the policy is to charge these higher rates on second homes and buy to lets, the changes are so wide the CIT says they will potentially catch children whose parents buy jointly with them to help them onto the housing ladder - among the very people the government claims it is hoping to benefit.
In the case of joint buyers, if any of them owns another property and is not replacing their main residence, the three per cent surcharge applies to the entire price.
This has led the institute to ask the government for a ‘carve out’ for joint buyers where the house will be genuinely used as a main residence of someone who does not already have one, as long as they are joint owners.
“A joint purchase may be made for reasons that have a clear social value and not a bid to set up a buy to let business. Life is complex and there are many situations where parents want to support their adult children in buying a home. Taking even a small interest (while owning another property) means that the extra three per cent is payable on the whole of the purchase price” warns Brian Slater, chair of the institute’s property taxes sub-committee.
“A further key concern with the government’s wider proposals is that the SDLT system is just not designed to make decisions about what the buyer is going to do with the property. The new system will mean that all sorts of value judgements have to be made about how the property will be used, making the conveyancing process increasingly complex.“