Shared Ownership staircasing - How to check first payment of stamp duty

Marina2016

We brought 50% of a shared ownership flat back in 2006 and are now in the process of purchasing the other 50% so staircasing to 100%.


We paid stamp duty on just our share at the time of purchase - purchase price £95,000. However now looking back at the documentation from the solicitor at the time only £850 for stamp duty was deducted on the completion statement. I think this should have been £950 (1% of share price). I think this might relate to a mistake being made on the paperwork by the Housing Association on the purchase price which was originally listed as £85,000, this was subsequently corrected before exchange and completion and the purchase price is correct on lease and title at Land Registry at £95,000.


I have a different set of Solicitors working on the staircasing. Is there a way of checking how much stamp duty was paid? If it was underpaid by £100 would I have received a letter from HMRC about this?

SDLT_Geek

Yes, ask the 2006 solicitors for a copy of the Land Transaction Return they submitted on your behalf. It sounds very much as if £850 was paid at the time. I would not have expected HMRC to have written to you if you underpaid, SDLT is a self-assessed tax.

Because your lease is pre 2008 you are going to have to revisit your 2006 return anyway because of the effect of linking of transactions when you staircase to 100%. If you give us the value now and what you are paying for the other 50% we can run some calculations for you:

(a) Further SDLT now due on the £95,000 paid in 2006 linked to the later transaction but using 2006 slab rates.
(b) SDLT now due on the new payment linked to the earlier transaction, but using today's sliced rates of SDLT.

Marina2016

Thanks for the reply. Will the Solicitors keep records dating back to 2006? If we have underpaid what are the consequences - is it just a case of paying the extra £100 now?



Yes, I will have to pay more stamp duty. I was previously quoted £1,416 by Solicitors but my own calculations made it £1,469 following previous advice on this forum.



I paid £95,000 for 50% share in July 2006. I am now paying £150,000 on the 50% share I am now buying. We will have in total paid £245,000. The full market value based on the valuation carried out by the surveyor is currently £300,000.

SDLT_Geek

I make it [£900] [Edit: Whoops, it is £1,469] you should pay on the staircasing transaction.
You have paid £245,000 in total.
SDLT on £245,000 at today's slice rates would be £2,400 (2% on the £120K over £125K).
But you pay a fraction of the £2,400.
The fraction is £150,000 / £245,000
That fraction of £2,400 is [£900] [Edit Whoops, it is £1,469]
So [£900] [Edit: £1,469] is the SDLT due on the staircasing.

Because your lease was granted before 12 March 2008 you need to revisit your 2006 tax to see if more is now due as a result of the later linked transaction. This is more tricky without knowing the full story, but here is my shot at it:

Looking back at tax rates in 2006 I would have expected you to have paid SDLT at 1% on the £95,000 premium. It was below the then threshold (£120,000 in the early part of the year and £125,000 later in the year). That threshold however would not have applied if the rent was over £600 a year (this rule only disappeared for residential property in 2008). So I expect SDLT on the premium at 1% was due then. I would not expect SDLT to have been due then on the net present value of the rents reserved in the 2006 lease as I doubt if they were high enough.

The effect of the later linked transaction is that you need to revisit the 2006 transaction and see if more SDLT is now due on the premium. The total paid is £245,000. That is below the £250,000 threshold at which SDLT rates in 2006 jumped to 3% on the whole price. So the tax due even after the later linked transaction remains at £950.

It would be good if you get to the bottom of the £850 paid. You will need to consider the best way of paying the £100 shortfall. You could perhaps add it to the SDLT due now on staircasing, but that might cause complications.

Marina2016

Ok. so I have emailed previous Solicitors to see if I can get a copy of the land tax return they would have completed. I am not entirely clear if they paid the £950 and then didn't correct the completion statement ie if I technically owe them £100 but they have never asked for it. Does HMRC keep a record of the transaction somewhere? I am not sure if the Solicitors will keep records dating back 12 years.Originally I was not expecting to pay stamp duty on the purchase as it was below the threshold but was told by the solicitors we had to pay as it was a new lease. The rent at the outset as set out in the lease was £3,800.04 per year.


My calculation of the stamp duty for staircasing 50% share:


£245,000 total paid
0% on £125,000
2% on £120,000 = £2,400
Apportioned £150,000/£245,000 = 0.612244898
£2,400 x 0.612244898 - £1,469

SDLT_Geek

Yes, you are right on the £1,469 for the tax on the staircasing itself. I must have had fat fingers on the calculator. I will put on notes correcting my post above.

I have checked the net present value of the rents for a lease at a rent of £3,800 pa. Even for a 999 year lease it would be below the threshold.