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HMRC consulting on new Stamp Duty threat to property sales

A leading accountant is warning of a possible stamp duty change affecting residential property this year.

HMRC is currently consulting on a change, with a closing date for comments of late next month: the Treasury says it specifically wants property professionals’ comments on the proposals.

The Revenue says it wants “to ensure there are fairer tax outcomes and to prevent abuse of the Stamp Duty Land Tax legislation” - this relates specifically to so-called ‘mixed-property’ transactions and Multiple Dwellings Relief. 

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Tim Walford-Fitzgerald, a partner at accountancy firm HW Fisher, explains: “At the moment if you buy the classic high street property of a ground floor shop with a flat above, you only pay commercial rates of SDLT. 

“HMRC are proposing that the cost should be apportioned so only the shop benefits from commercial rates, with the flat suffering the higher residential rates. 

“HMRC are currently consulting on these proposed changes together with considering changes to reduce the increasing number of incorrect multiple dwelling relief claims. The review is due to close on February 22.”

In addition, Walford-Fitzgerald identifies other tax changes which may this year impact on the housing market.

“Capital Gains Tax for residential property transactions can now be paid within 60 days, following calls for the 30-day payment period to be doubled due to unsuspected homebuyers being hit with fines. We expect the recent extension of the disposal reporting deadline to result in greater enforcement against those who have failed to meet their reporting obligations.”

On top of that, the reduced VAT rate has now ended on holiday lets.

He continues: ”Don’t forget that the temporary reduced rate of VAT for supplies of holiday accommodation increased from 5.0 to 12.5 per cent on October 1 2021. 

“Even if a holiday is taken after October 1 the 5.0 per cent can still be applied if a tax point is created beforehand.”

And Walford-Fitzgerald comments that property investors should avoid the VAT and tax traps of developing student accommodation.

“There are VAT reliefs available for student accommodation where classed as dwellings or relevant residential. The former is preferred as it avoids the need to monitor the use of the property over the 10 years post completion. 

“If constructed as dwellings (single studio units or cluster flats), the VAT relief (zero-rate) extends not just to the main contractors but to services provided by sub-contractors.”

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