Stamp Taxes

Higher SDLT Rates on Additional Residential Properties

Higher rates of Stamp Duty Land Tax (SDLT) are to be introduced for certain purchases of residential property. The rates will be 3 percentage points higher than the normal rates and will apply to transactions which complete on and after 1 April 2016, provided that contracts were exchanged after 25 November 2015.

The higher rates will apply if, at the end of the day of the transaction, an individual purchaser owns 2 or more properties and the purchased property is not a replacement for their main residence. If there is a period of overlap in ownership of a main residence, a refund of the higher rates can be obtained if the previous main residence is sold within 36 months following the purchase of the new. The higher rates will not apply to the purchase of a main residence if there was a gap in ownership of such a residence of no more than 36 months ending with the date of the purchase.

The higher rates will also apply to companies purchasing residential property, including the first purchase of such a property.

The higher rates will not apply to properties purchased for less than £40,000 or to caravans, mobile homes and houseboats. Small shares in inherited properties will not be taken into account when determining if the higher rates apply for 3 years beginning with the date of inheritance.

SDLT on Non-Residential Property

Two changes are to be made to the way in which Stamp Duty Land Tax (SDLT) is calculated on purchases of non-residential properties and transactions involving a mixture of residential and non-residential properties. The changes will apply on and after 17 March 2016. Where a contract has been exchanged but the transaction has not completed before that date, the purchaser will be able to elect to apply either the old or the new rules.

The existing basis of calculation, under which SDLT was charged at a single rate on the entire purchase consideration, the rate being determined according to the band in which the consideration fell, will be replaced. Each of the rates set out in the table below will instead apply to the portion of the consideration falling within each band.

Band of consideration Rate

£0 – £150,000 0%

£150,001 – £250,000 2%

Over £250,000 5%

A new 2% rate band will be introduced for rent under a non-residential lease which will apply to the portion of the net present value of the rent which exceeds £5m.

Deep in the Money Options

Where UK securities are deposited with a depositary receipt issuer or clearance service following the exercise of an option, the transfer will be chargeable to stamp duty or stamp duty reserve tax (SDRT) at 1.5% of the higher of the market value or the option strike price at the date the instrument is executed (for stamp duty) or the date of transfer (for SDRT).

This rule will apply to options entered into on or after 25 November 2015 and exercised on or after 16 March 2016.