Interview with David Hannah: Specialist in Stamp Duty Land Tax (SDLT)

Hi, David, how long have you been a tax adviser?  david hannah photo

I’ve been practicing as a chartered tax advisor since I qualified in 1988. I’m also a qualified chartered accountant.

When and why did you start to specialise in SDLT?

I started in SDLT in 2003 when it was first introduced, I founded, Cornerstone Tax in 2006 because I wanted to build a firm that could advise as a specialist on SDLT and other areas of property related taxes. SDLT has undergone more changes since its inception than any other tax. The complexities of its nuances and exceptions make it particularly interesting.

What are the most common mistakes you see in your area of tax?

In the case of SDLT, the most common error made by property purchasers is that they assume their solicitors or conveyancers are actually “advising” on their SDLT payment calculations, which they’re not, and don’t consider using a dedicated tax expert.

What is your top tax tip for general practitioner accountants?

Not to assume that all properties fall under residential or commercial classifications or that the solicitor will be dealing with it – there’s a common feeling among accountants that SDLT is a lawyers tax.

What has been the most rewarding thing you have done from a tax perspective?

One of our clients bought their first home this year and initially overpaid their SDLT bill by £9,000 due to their solicitor giving them the wrong advice, albeit unintentionally. Helping first time buyers reclaim tax that they have overpaid, at a stage in their lives when they have usually stretched themselves to their financial limit, is hugely rewarding.

How would you improve the way HMRC operates?

I’d like to see HMRC become more open with the private sector and invite increased dialogue and collaboration. The adversarial nature of HMRC’s relationship with private tax advisors creates a no-man’s land between the two sides that slows any resolution to the problems facing the UK tax system.

Many thanks David

David can be contacted via his profile page here >>>

IHT residential nil rate band, SDLT on death, Mortgage references

Perhaps it is the draining effect of the General Election campaign, but last week our thoughts turned to death and taxes. The new residential nil rate band for inheritance tax came into effect on 6 April 2017, and HMRC have released detailed guidance. Where a couple own their home as tenants in common, this can create a SDLT on a transfer following the death one owner. Finally, we had some tips on how to handle requests for mortgage references.

Below is just an extract from last week’s tax tips email. You can register to receive future copies by following the link on the right (or below, if you’re reading this on a mobile device)

SDLT on death

Stamp duty land tax (SDLT) is currently payable by purchasers of property located in England, Wales and Northern Ireland. This article does not apply to properties Scotland, which has its own property law, and the land and buildings transaction tax (LBTT).

Where freehold residential property is jointly owned, it may be held in two ways: as joint tenants, where each person holds an undivided share, or as tenants in common, where each person hold a defined share, such as 40% and 60%. “Joint tenants” is the default, which conveyancing solicitors prefer, and it has the advantage that when one of the owners dies the other owner automatically acquires ownership of the entire property.

“Tenants in common” can form part of an IHT plan, as the owners may chose to leave their share in the property to a third person. Investment properties may be held in this way, so the joint owners can be taxed on the profits in relation to their beneficial interest in the property, rather than on a 50:50 split. Although a married couple/ civil partners need to declare the split of ownership on form 17, and submit that declaration to HMRC.

The rates of SDLT were increased on 1 April 2016 to include a 3% supplement on the entire value where an additional residential property is acquired for £40,000 or more. An individual is treated as acquiring an additional property if he already holds a major interest in a residential property which is worth £40,000 or more, which is not subject to a lease which has more than 21 years to run.

Say Fred and Ginger own their home as tenants in common. Fred dies and does not leave his share in the property to Ginger. Fred’s executors agree to sell Fred’s share in the property to Ginger for £80,000. Ginger already owns a major interest in a property (her own home), so the acquisition of another interest in a residential property meets the conditions for the 3% SDLT charge to apply. It is irrelevant that the interest Ginger acquires is in the property which she already partly owns.

When reviewing IHT planning for clients consider this SDLT trap

VAT: Expenses and benefits, Tax-free childcare, Reclaiming the SDLT supplement

Last week we take a look at the requirements for reporting expenses and benefits to HMRC for the 2016/17 tax year. We also examined the new Childcare Choices website and the options for tax-free childcare in 2017 and beyond. Finally, we explained how to claim back the stamp duty land tax supplement where a former main residence is sold subsequent to the purchase of a new home.

Below is just an extract from last week’s tax tips email. You can register to receive future copies by following the link on the right (or below, if you’re reading this on a mobile device)

Reclaiming the SDLT supplement

Since 1 April 2016 a stamp duty land tax supplement has been payable on the purchase of second and subsequent residential properties costing more than £40,000. Generally, the supplement is not payable where the main residence is replaced, even if the purchaser ends up with more than one residential property after the purchases has completed. However, where the new main residence is purchased before the former main residence is sold, the supplement is payable initially. However, as long as the sale of the old main residence is completed within three years of the purchase of the new home, the supplement can be reclaimed.

So, what is the procedure for this and what time limits apply?

The repayment can be claimed either online or by post on form SDLT16, which can be completed online and printed off. The SDLT reference for the purchase is required. The claim must be made by the later of three months from the date of completion of the sale of the former residence or 12 months from the filing date of the SDLT return (which is 30 days from the completion of the purchase). It is important these deadlines are not missed or the opportunity to reclaim the supplement will be lost.

SDLT warning, Bags and alcohol, CT service issues

There are some things you can count on in tax – like the law taking effect from the day it is passed, or occasionally from the day the Chancellor announces the change. That is no longer the case with SDLT, as we explain below. We have advance warning of a new charge and a new registration scheme which certain retailers and wholesalers may need to comply with. There are also current and future issues with corporation tax filing software.

SDLT warning 
When your client purchases a new home you may not be involved in the transaction at all. The conveyancing solicitor will handle the land registration and SDLT forms, and in the past some conveyancers offered schemes to avoid paying the SDLT. 
If your client took up such a SDLT avoidance scheme you need to talk to them about HMRC’s new position on SDLT avoidance, as set out in Spotlight no. 25. HMRC are advising taxpayers who have used any SDLT avoidance scheme to contact them without delay and pay the SDLT liability due. There is likely to be interest due on any late paid SDLT, but the taxpayer may get away with a zero or low penalty if they make a full disclosure before HMRC approach them. 
Your client may protest that the SDLT scheme they were sold was “water tight” and no tax cases have been taken to prove it doesn’t work. That may be so, but the Government can change the tax law with retrospective effect, and the case of APVCO Ltd has shown that taxpayers have no grounds on which to argue against that. 
On 21 March 2012 George Osborne announced measures to block various SDLT schemes and said that similar schemes would be blocked when discovered. Anti-avoidance legislation was included in FA 2012 and FA 2013, with both sets of provisions back-dated to take effect from 21 March 2012. So where your client tried to avoid SDLT on or after 21 March 2012, they will now have to pay up.

This is an
extract from our tax tips newsletter dated 27 August 2015
. You can obtain future issues by registering here>>>

Last week’s newsletter contained links to related source material for this story and the
other two topical, timely and commercial tax tips. Published weekly since 2007, every week it’s clearly written
and focused on precisely what accountants in general practice need to know about that week.