SDLT on Shared Ownership Staircasing

badenmorgan

Hi

I wonder if you can help. I own 35% of my flat under shared ownership arrangement, with housing association owning rest, 65%. I am about to staircase to 100% in next 2-3 weeks. As it's Shared Ownership I understand we had the option at the time of purchase of deferring Stamp Duty or paying it all upfront on full market value. The 35% I bought back in 2006 was a re-sale from the first owners who bought the 35% in 1990 and never staircased. I've no idea if they paid any SDLT. 

I do not have any record from when we purchased the 35% if we deferred payment of the SDLT or elected to pay it all upfront based on full market value. I have tried to email our solicitors but they have gone bust. I have followed up with their administrators, and await, but solicitors are only required to keep client records for 6 years. I wrote to HMRC but they say they don't keep records for more than 6 years and so they no longer hold any record of the transaction.. My current solicitors won't seem to help, offering no SDLT advice at all (I thought they took care of that as part of the conveyancing but apparently not in my case). I have a couple of questions:

1. Am I right that as the lease is not new this first 35% is not treated as a 'linked transaction' and I do not need include it my SDLT calculation? If I was to pay SDLT on the 65% transaction I've calculated it would be c£2k.

2. If I have no record of whether or not I deferred or elected to pay the full market value SDLT, my solicitor client file no longer exists, and HMRC say they no longer have a record, by law do I have assume that I haven't paid any and need to pay it? Or if no one holds records and I don't remember can I argue that I could have paid the SDLT on full market value in 2006 and owe HMRC nothing? 

Thanks

SDLT_Geek

The election as to whether or not to pay SDLT on market value is made at the time the lease is granted and is usually recorded in the lease.  Standard form leases tend to be used and it is at clause 6 or 7 usually, from memory.  As you acquired the lease by purchase of an existing lease, you did not have the opportunity to elect.  So you need to look at your lease to see if, on the grant, the first lessees elected to pay on market value.  If so, then you have no SDLT to pay on staircasing out.

If no election was made on grant, then my reading of the rules is that your staircasing transaction from 35% to 100% is not linked to any other transaction.  It is not linked to the acquisition of the lease by the original lessee, nor to the purchase of the lease by you from the previous lessee.

badenmorgan

Thank you SDLT_Geek. Two things I found on the original lease: Clause 9 'stamp duty certificate of shared ownership'. It is crossed out in ink and mentions the market value, rent as peppercorn, and 'that they intend stamp duty to be charged in accordance with the said section 108 by reference to the Initial Market Value and said minimum rent.' I'm not sure what that means if it's crossed out. But, on page 1 there are 5 red and white impressed/embossed stamps with a white head in the middle, that I think are Duty Stamps, of various values totaling £544. Next to them is an ink stamp from Inland Revenue with the same date as the stamps and 'finance act 1931'. I've tried to work out the amount the original leaseholders would have paid had they elected to pay it all up front in July 1990, which is £585 (market value £88,500) so a bit short, but perhaps they topped the rest up by other means.  I'm hopeful that this indicates SDLT was paid. Can you please advise? Thanks again

SDLT_Geek

It seems from the crossing out of clause 9 of the lease that the decision was made at the time the lease was granted not to pay stamp duty on the market value of the property. Stamp duty on the £88,500 premium in 1990 would have been at 1%, so £885; it is clear that the full amount of stamp duty on market value was not paid.

That means that on staircasing to over 80%, SDLT will be due if the staircasing payment is high enough.  At least there is no "linking" of the payment you make to staircase to other payments made.

badenmorgan

Ah, ok. I thought the 1% SDLT in 1990 only applied to the value over £30k, so if the value was £88,500 the 1% tax was calculated against £58,500, hence £585. Do you not think the Duty Stamps on the first page of the lease mean anything? I thought (perhaps more like hoped) they are a record of SDLT paid.  They are also dated within 30 days of the lease being signed. They are though less than £585, at £544. Perhaps I'm clutching at straws here. Thanks again for your help.

SDLT_Geek

The old stamp duty was worked out on a slab rate system with cliff edges.  So if a market value election had been made the stamp duty would have been 1% of the whole value, so £885.  The stamp duty seals on the front page mean some stamp duty was paid, but it seems on the lower premium and rents, not on the market value basis.  Let go of those straws!  

How much are you paying to staircase out?  It does not make sense to staircase to 80% now and do the rest later?  That should both defer and reduce the SDLT.

badenmorgan

We're committed to 100% staircasing, SDLT will be around £2k. That's cleared it up for me, many thanks for your help!

Carlington

Hi @SDLT_Geek, I know this is an old thread but I have a similar situation, if you dont mind helping me?. I've tried to use the formula provided and asked chat GPT, one said £4000, and one said nothing? (helpful I know) and Ive asked my previous solicitor whos told me to speak to HMRC or a tax adviser?. 

I bought a new build in 2017 @50% £340k. Staircased in 2023 to 75% = £255k. Id now like to go to 100% but was advised anything over 80% MAY be subject to SDLT. Can you provide any clarification or help? Best Regards.

SDLT_Geek

Carlington said:

Hi @SDLT_Geek, I know this is an old thread but I have a similar situation, if you dont mind helping me?. I've tried to use the formula provided and asked chat GPT, one said £4000, and one said nothing? (helpful I know) and Ive asked my previous solicitor whos told me to speak to HMRC or a tax adviser?. 

I bought a new build in 2017 @50% £340k. Staircased in 2023 to 75% = £255k. Id now like to go to 100% but was advised anything over 80% MAY be subject to SDLT. Can you provide any clarification or help? Best Regards.

The property is in England and you have a shared ownership lease granted to you by a registered social landlord?

You paid £340K for the 50% share on the grant of the lease to you in 2017, but did not elect to pay all of the SDLT then?  (I expect you would still have had to pay about £7,000 SDLT.)

You then paid £255K in 2023 for a further 25% share?

You are now paying something like £260K for the final 25% share?  How much are you paying?

If you confirm this, I will have a go at the calculation for you.

Carlington

@SDLT_Geek
Sorry I haven't written that very well;
Housing Association, Shared owner, lease granted;
Property Value £345k
My share at 50% = £172k back in 2017
2023 Value - £340k and staircased to 75% = £255k owned, £85k remaining.
2025 - Wish to staircase to 100%

In terms of Election to pay? I have no idea...and solicitor doesnt seem to have any answers. 
Many Thanks

SDLT_Geek

Carlington said:

@SDLT_Geek
Sorry I haven't written that very well;
Housing Association, Shared owner, lease granted;
Property Value £345k
My share at 50% = £172k back in 2017
2023 Value - £340k and staircased to 75% = £255k owned, £85k remaining.
2025 - Wish to staircase to 100%

In terms of Election to pay? I have no idea...and solicitor doesnt seem to have any answers. 
Many Thanks

In 2017 you had a choice of paying SDLT on the £172K paid (£940 of SDLT) or on the £345K market value (£7,250).

If you paid SDLT of £7,250 there would be no more SDLT to pay now.  If you paid SDLT of £940 there would be SDLT to pay, now your are staircasing over 80%.

You have already paid for the property £172K and £85K.  You do not say what you are paying now for the last 25%, but I will work on the basis that you are paying another £85K.

That would make the total you pay for the property £342,000.  Therefore we need to work out the SDLT on the £342,000 at current rates and then take a fraction of the SDLT so calculated.

SDLT on £342,000 at the rates in place until 31 March 2025 would be £4,600.

You pay a fraction of this.  On my assumptions the fraction is 85/342.  That gives SDLT due of £1,143.