According to HMRC’s estimates, the number of completed transactions in March 2020 is likely to be in line with the March 2019 figures. The Treasury’s Stamp Duty Land Tax (SDLT) receipts for the first three months of 2020 are therefore likely to remain strong. However, with market reports suggesting that some 370,000 property transactions have been put on hold since coronavirus lockdown began, the picture for April is likely very different.
Where somebody moves home and has, for one reason or another, not been able to sell their former home beforehand, they can be subject to an additional 3 per cent SDLT charge. The rules formed part of a series of measures that seemingly sought to discourage property investment, increasing the tax costs for buy-to-let landlords. However, the impact of the rules is much broader and can affect a wide variety of property purchases.
As part of its strategy to alleviate the housing supply shortage, the government has been trying to encourage self-builders in recent years.
A self-build project can take time and one of HMRC’s tax reliefs (specifically a capital gains tax relief when selling your main home) acknowledges that a two-year build is not unreasonable. It therefore follows that many self-builders could retain their existing home whilst undertaking such a project, unless they are willing to move their family into a caravan or rented accommodation in the meantime.
Someone who acquires a second property and pays the 3 per cent SDLT surcharge because they haven’t yet sold their existing home has a three-year deadline for selling one of the properties and reclaiming the extra SDLT paid. That deadline could be relevant not only to self-builders, but perhaps more commonly for couples who have married and moved in together without having sold their previous homes yet.
There will be a significant number of people who were hoping to sell their former homes this year and reclaim the 3 per cent SDLT surcharge but due to current lockdown requirements and their impact on the property market will not be able to do so. Given this is not a problem of the individuals’ own making, and for self-builders in particular who have heeded the government’s encouragement in prior years, it feels a particularly penal situation and unjust for HMRC to benefit when they otherwise would not have done so. Hopefully it is on the to-do list of measures at the Treasury to grant a temporary extension of the three-year rule.