Developments on Stamp Duty Land Tax Regulations

The past year has seen several changes in the regulations surrounding Stamp Duty Land Tax (“SDLT”). This is a tax which is payable to HMRC, on the purchase of freehold or leasehold property and on the grant of leases, if they are valued over a certain threshold.

Until 28 February 2019, the filing and payment deadline for SDLT was 30 days after the ‘effective date’ of the transaction. The effective date is either the earlier of completion of the transaction or substantial performance of that transaction; for example, entering into an Agreement for Lease (“the agreement”). However, from 1 March 2019 there was a reduction in the deadline for filing the SDLT application, and paying the tax, from 30 days to 14 days (note not 14 working days). This was not retrospective and only applied to transactions with an effective date on, or after, 1 March 2019.

The reasoning behind the change was that, according to HMRC’s figures, 85% of SDLT applications are already filed within 14 days of the relevant transaction. The SDLT form was also simplified by reducing the number of questions so as to make it easier for the form to be submitted within the relevant time period. As always, the best course of action is to ensure that your form is drafted in advance of the effective date of the transaction, and funds are available to be transferred promptly, so that the application can be submitted on completion.

There has also been recent caselaw (Candy v HMRC 2020 UKFTT 113 (TC)) on the time limit for amending your application in relation to repayment claims for uncompleted, substantially performed transactions. A buyer may reclaim repayment, of their previously paid SDLT on the substantial performance of a contract, if the contract is then not carried out. The most obvious example of this would be if an agreement has not been performed and is rescinded in advance of completion of the transaction. In the Candy case the First-tier Tribunal (“the Tribunal”) held that the twelve-month time limit, for amending the SDLT application, did not apply to amendments for a repayment of SDLT in respect of substantially performed contracted that did not proceed to completion.

The case involved a buyer who substantially performed the agreement which was then replaced with a further agreement. He then amended his SDLT application to reclaim the tax on the existing agreement that had been replaced by the new agreement. The application was rejected as the amended application was submitted over twelve months following the SDLT application. However, this was rejected by the Tribunal who found that the twelve-month time limit did not apply to amendments to applications for substantial performance of a contract which were then not completed. This is a welcome decision for purchasers entering into contracts and agreements for lease in advance to completion of property transactions.