Stamp Taxes News August 2021

HMRC have published their Stamp Taxes news for August 2021. Here is our enhanced version with links to our guides and SDLT tools.

Electronic stamping: New system from 21 July 2021

• All transfer instruments (including form SH03 to record the Purchase of own shares) are submitted to HMRC electronically
• In place of a physical stamp on the transfer instrument, HMRC issues a letter confirming that duty has been paid or a claim for relief has been adjudicated
• Instruments processed under this system are duly 'stamped' for all purposes.

Where taxpayers are unable to submit electronically, an alternative postal option is available.

HMRC has updated its main guidance and two new pages have been added to the Stamp Taxes on Shares Manual:

• STSM011015: New method of stamping.
• STSM011015A: Withdrawal of physical stamping.

Stamp Duty Land Tax (SDLT) rate changes

All change for the Nil rate band for residential purchases in England and Northern Ireland:

• The temporary increase in the nil rate band of £500,000 applied between 8 July 2020 and 30 June 2021.
• The nil rate band reduces down to £250,000 between 1 July and 30 September 2021.
• From 1 October 2021, the nil rate band return to its original level of £125,000.

First-time buyers remain eligible for reduced rates of SDLT if the property they purchase costs up to £500,000.

• They pay no SDLT on the first £300,000 and SDLT at 5% on any amount between £300,001 and £500,000.

HMRC's SDLT online calculator is up to date and its calculations reflect these changes to the nil rate band.

SDLT Freeports

• Land transactions relating to the acquisition of qualifying Freeport land will be exempt from SDLT. Relief must be claimed in a land transaction return on or before 14 October 2027.
• The effective date of the land transaction must be on or before 30 September 2026.
• SDLT relief for purchases of land and buildings within a Freeport tax site, subject to a ‘control period’ of up to three years and the land being acquired and used in a ‘qualifying manner’.

See Freeports: Tax Breaks

Schedule 36 Information Notices changes for SDLT

Finance Act 2021 extended Condition D for SDLT to allow HMRC more time to check that conditions for reliefs claimed on purchase are met following the end of the three year control period. This also applies for Freeports as well as for general SDLT transactions, e.g. first-time buyer's relief, MDR etc.

• A taxpayer notice in reliance on new Condition D may not be given later than four years after the effective date of transaction (effectively no later than 12 months after the end of the typical three-year control period).
• An exception to this general rule concerns ‘seeding relief’ where the four-year time limit begins on the first day of the control period. This takes into account the ‘seeding period’ during which relief can be claimed and which can last up to 18 months before the start of the control period.

See Schedule 36 Information Notices

Consultations: just two new ones

• A Summary of Responses was published in July 2021 following a Call for Evidence on the ‘Modernisation of the Stamp Taxes on Shares Framework’.
  • The government says that it "will explore the feasibility and implications associated with the key priority areas identified by respondents, including by setting up a Working Group to work collaboratively with stakeholders."
• A Summary of Responses was published in July 2021 following the second-stage consultation on potential reforms to the tax treatment of asset holding companies in alternative fund structures.
  • The document includes a discussion of the Stamp Duty and SDRT responses and next steps.

Topical issues 

Multiple Dwellings Relief & Annexes

If two or more dwellings are acquired as part of the same transaction or a Linked transaction then MDR can be claimed for SDLT purposes.

One particular area that is causing a lot of difficulty for both taxpayers and their advisers is claims for MDR on the purchase of a house with an annexe or outbuilding.

HMRC’s position that when taking a balanced view of all the facts, the following are important considerations:

• The dwelling should be physically configured to provide independent access, security and privacy.
• The dwelling should include basic living facilities, including a sleeping area, living area, a bathroom and a kitchen.
• Each dwelling should have control of their own utilities

The Upper Tribunal confirmed this view in Keith Fiander and Samantha Brower v HMRC [2021] UKUT 0156, the Upper Tribunal endorsed the approach of the First Tier Tribunal (FTT) when deciding that an annexe was not a separate dwelling for Stamp Duty Land Tax (SDLT) Multiple Dwellings Relief (MDR). There was no door separating the house from the annexe.

Other MDR cases heard by the FTT which concluded that annexes did not meet the separate dwelling test are:

• In Edward and Clare Partridge v HMRC [2021] TC7991, a lack of privacy or security. This was in part due to the bathroom being only accessible through the main house.
• In Andrew & Tiffany Doe v HMRC [2021] TC08003, a lack of privacy or security. A bedsit contained within a larger property was only accessible through the main house.
• In Michael and Anthea Mullane v HMRC [2021] TC08100, a lack of facilities. The cooking facilities were of insufficient quality to allow the annexe to be occupied as a separate dwelling. 
• In John Mason v HMRC [2021] TC08216, a lack of facilities The lack of internal plumbing to install a kitchen sink as well as the annexe only being accessible while being in close proximity to the main house, proved the deciding factors.

While FTT cases do not set any precedents, the Fiander case, which does set a precedent did follow the same lines of reasoning.

SDLT Tool

Our SDLT: Multiple Dwellings Relief Tool: is a quick way to save yourself the cost of a tax appeal. Use this to check whether MDR is possible on the purchase of a larger property with an annexe, a granny flat, or some other kind of accommodation, such as a cottage within the grounds of the larger property.

Late refunds on change of contract

In HMRC v Christian Peter Candy [2021] UKUT 0170, the Upper Tribunal (UT) found that an SDLT return could not be amended outside the standard 12-month window. SDLT has been paid on the substantial performance of a contract but, before completion, that contract is annulled, rescinded or otherwise not carried into effect, the purchaser is only able to amend their SDLT return and claim a repayment under the usual 12-month time limit.

Useful guides on this topic

Our Stamp Taxes News April 2021 

SDLT: Non-residents’ surcharge
Non-UK residents will be subject to an additional 2% Stamp Duty Land Tax (SDLT) surcharge on the acquisition of UK residential property from 1 April 2021.

Freeports: tax breaks
The government has provided details of new tax breaks, confirmed in Finance Act 2021, for businesses seeking to locate and operate in a Freeport. Tax breaks cover Stamp Duty Land Tax (SDLT), Capital Allowances, National Insurance and business rates.

Annual Tax on Enveloped Dwellings (ATED)
What is ATED?  Who does ATED apply to?  What relief is available and how is it claimed?  What are the ATED return filing dates?

SDLT: At a glance SDLT rates and allowances
What is Stamp Duty Land Tax (SDLT)? What are the rates of Stamp Duty Land Tax (SDLT)?

SDLT: Multiple Dwelling Relief
What is Multiple Dwellings Relief (MDR) for Stamp Duty Land Tax purposes? When does it apply and how is it claimed?

SDLT: Multiple Dwellings Relief & Annexes Tool
Stamp Duty Land Tax (SDLT) Tool, if you are buying two or more properties in a single transaction use this tool to see if you meet the qualifying conditions and you may be able to claim both Multiple Dwellings Relief and relief from the Higher Rate Charge.

External links

HMRC's Stamp Taxes Newsletter August 2021