The relief comes into force today and therefore practitioners need to be aware of the definition of “first time buyer”; when the relief is available; and any new procedures to be followed.
Steeles Law’s Head of Conveyancing Melissa Richards explains.
The Relief
For the relief to be available, the transaction must satisfy the following requirements:
- The property must be residential property. Non-residential or mixed use properties do not qualify
- All purchasers (including joint purchasers) must intend to occupy the property as their main residence
- The transaction must not be linked with any others for SDLT purposes
- The transaction must consist wholly of the acquisition of a major interest in land (defined as a freehold or a leasehold interest with more than 21 years to run)
- All purchasers (including joint purchasers) must not have previously acquired such an interest in land.
This final point requires further consideration:
“First Time Buyer”
To be a “first time buyer”, the purchaser must not have previously acquired an interest in a freehold or leasehold property. “Interest” includes previously owning property as either a joint tenant or tenant in common.
Interestingly, this applies not just to UK properties, but properties anywhere else in the world.
If buying jointly, all purchasers must satisfy this requirement.
Procedure
Land transaction returns should be completed as normal. To claim the relief, the purchaser’s conveyancer must enter relief code 28 at box 9 of the return.
Many conveyancers with completions in the next couple of days and weeks may have already had land transaction returns approved by their clients. Conveyancers need to consider whether any of these clients should be contacted to confirm whether or not they may apply for the relief.
When taking instructions on all new purchases, conveyancers will now have to obtain further information from their clients in order to establish whether they are eligible for the relief.
This should take the form of a “First Time Buyer Declaration”, asking the prospective purchaser/s to confirm, amongst other things, whether they are a first time buyer. The requirements of the relief will have to be explained carefully to clients, along with the implications of giving false information and SDLT fraud. This is particularly important as there will be no way that the conveyancer may verify the accuracy of the information provided.
Going Forward
It will be interesting to see how practice and procedure develops over the coming months to take into account this substantial new relief to SDLT. It is not difficult to envisage circumstances in which clients will attempt to avoid SDLT, for example purchasing properties in a sole name where they would have otherwise purchased jointly. Whether, and to what extent, such schemes will be addressed by HMRC remains to be seen.
For more information on this subject or any other conveyancing queries please contact Steeles Law’s Head of Conveyancing Melissa Richards on 01603 598000 or mrichards@steeleslaw.co.uk.