25th March 2011
The Stamp Duty Land Tax (“SDLT”) reforms announced in the Chancellor’s budget on 23rd March 2011 relating to bulk property transactions is potentially great news for investors.
SDLT on the purchase of more than one property under one contract will now be calculated by basing the SDLT tax rate on the average value of the properties bought rather than their aggregate value which was the case previously. By way of example the change means if you are buying 3 properties for £600,000 but worth on average £200,000 you will only pay SDLT on the average price which will attract an SDLT rate of 1% (ie. a charge of £6,000) as opposed to the previous regime where the SDLT rate was based on the aggregate value which would give rise to a 4% rate (ie. a charge of £24,000). With the new 5% SDLT rate coming into force on 6 April 2011 for residential properties worth over £1,000,000 the potential saving on residential properties could be even greater. For example 5 properties are bought for £1,250,000 with an average value of £250,000 will now attract an SDLT charge of £12,500 whereas under the new 5% SDLT rate, if the bulk transactions exceptions had not been brought in, the charge would have been £62,500. That is a £50,000 difference. We await the small print of the new rules from HMRC before we can advise exactly how the new rules will work but on the face of it if you are bulk purchaser of property this is a welcome boost in what is a difficult market.