Stamp duty woes: selling up and a renovations business

DIRECTOR, KAY & CO

Q My property is currently on the market at £2.15m. I had accepted an offer of £2.05m but unfortunately the recent stamp duty increase caused the sale to fall through and I have not had much interest since. I have found somewhere else that I want to buy and do not want to lose that property. hat do you advise?

A Stamp Duty Land Tax (SDLT) increased from 5 per cent to 7 per cent for properties in excess of £2m at midnight on 22 March, literally hours after the announcement on 21 March. There was a scramble as buyers brought forward exchange deadlines to try to exchange before the new rate came into effect, which essentially represented a 40 per cent increase in the the tax levied. You are not alone in your experience and many other deals did not proceed accompanied by stories of chains breaking down due to the government's implementation of the increase. Unfortunately it is unlikely that you are going to receive an offer in excess of £2m as most buyers will bid up to this level and not more in order to avoid entering the 7 per cent tax bracket. Time being of the essence for you, I would suggest that you reduce the asking price to £2.05m or even £2m in order to stimulate interest in the hope that you do not lose your related purchase.

Q For about five years, I have been renovating properties through a small development company that I own as a side line. The majority of what I have purchased has been in central London and in excess of £2m.

I am concerned that the new 15 per cent Stamp Duty Tax on companies will make my business unviable; are there any ways in which I can avoid this?

A The government has introduced a 15 per cent SDLT on purchases of residential property over £2m by “non-natural persons”. This measure aims to disincentivise the ownership of high value residential property in structures which would permit the indirect ownership or enjoyment of the property to be transferred in a way that would not be chargeable to SDLT (ie. the onward sale of the property by transfer of share rather than the asset). For the purposes of the higher rate charge, “non-natural person” includes companies, collective investment schemes (including unit trusts), and partnerships in which a non-natural person is a partner. However, there are exclusions from the charge for property developers and corporate trustees in certain circumstances. As you appear to be a legitimate property developer who has been trading for more than two years, the legislation enables you to avoid the 15 per cent tax levy and instead be liable for new 7 per cent SDLT rate, which you would have had to pay were you to have bought a property in your personal name.