SDLT Shared Ownership staircasing - is my understanding of the fees correct?

SharedOwner456

Hi there,

I wonder if you could help to confirm our understanding of the stamp duty process please?

We own 50% of a property - the share was worth £189,000 in 2017 and we paid stamp duty on the share we purchased only (not on the full market value). The property is now worth £400,000.

We are now in a position to staircase up to 100% ownership. My understanding is that we would be charged stamp duty on the transaction that takes us to 100% and disregard the rest because we have already paid stamp duty on the first 50%. The transaction is worth £200,000 (or £211,000 if we factor in the increased value of the property?).

Is it correct then that if we were to staircase up to 100% stamp duty would be payable on the £200/211k figure?

Furthermore, if we were to staircase to 100% between 1st July and 30 September 2021 we would not have to pay stamp duty because we would only be paying for the £200/211k transaction which is still below the £250k threshold for the above time frame?

Thanks in advance for any advice you can give!

SDLT_Geek

SharedOwner456 said:

Hi there,

I wonder if you could help to confirm our understanding of the stamp duty process please?

We own 50% of a property - the share was worth £189,000 in 2017 and we paid stamp duty on the share we purchased only (not on the full market value). 

Did you buy the property from a social landlord?  Was the purchase by the way of the grant of a new lease?  Or perhaps you took an assignment of an existing lease from a previous owner?

The property is now worth £400,000.

We are now in a position to staircase up to 100% ownership. My understanding is that we would be charged stamp duty on the transaction that takes us to 100% and disregard the rest because we have already paid stamp duty on the first 50%. 

Depending on the transaction history, it is likely that the first £189,000 will be taken into account under linked transactions rules, but not actually taxed.

The transaction is worth £200,000 (or £211,000 if we factor in the increased value of the property?).

The tax will be due on 50% of £400,000, that is £200,000.  You do not add back in £11,000 (£200,000 - £189,000 you had in mind I guess)

Is it correct then that if we were to staircase up to 100% stamp duty would be payable on the £200/211k figure?

On £200,000, but linking in the £189,000 if you bought in 2017 from the social landlord.  The method would be to work out SDLT on the total £389,000 paid, using today's rates of SDLT.  You then take a fraction of that.  The fraction is 200/389.

Furthermore, if we were to staircase to 100% between 1st July and 30 September 2021 we would not have to pay stamp duty because we would only be paying for the £200/211k transaction which is still below the £250k threshold for the above time frame?

Thanks in advance for any advice you can give!

If you bought from an RSL in 2017, then the SDLT on £389,000 for a staircasing between 1 July and 30 September 2021 would be £6,950.  The tax is a fraction of this, 200/389, so the SDLT payable would be £3,573.

SharedOwner456

SDLT_Geek said:

SharedOwner456 said:

Hi there,

I wonder if you could help to confirm our understanding of the stamp duty process please?

We own 50% of a property - the share was worth £189,000 in 2017 and we paid stamp duty on the share we purchased only (not on the full market value). 

Did you buy the property from a social landlord?  Was the purchase by the way of the grant of a new lease?  Or perhaps you took an assignment of an existing lease from a previous owner?

The property is now worth £400,000.

We are now in a position to staircase up to 100% ownership. My understanding is that we would be charged stamp duty on the transaction that takes us to 100% and disregard the rest because we have already paid stamp duty on the first 50%. 

Depending on the transaction history, it is likely that the first £189,000 will be taken into account under linked transactions rules, but not actually taxed.

The transaction is worth £200,000 (or £211,000 if we factor in the increased value of the property?).

The tax will be due on 50% of £400,000, that is £200,000.  You do not add back in £11,000 (£200,000 - £189,000 you had in mind I guess)

Is it correct then that if we were to staircase up to 100% stamp duty would be payable on the £200/211k figure?

On £200,000, but linking in the £189,000 if you bought in 2017 from the social landlord.  The method would be to work out SDLT on the total £389,000 paid, using today's rates of SDLT.  You then take a fraction of that.  The fraction is 200/389.

Furthermore, if we were to staircase to 100% between 1st July and 30 September 2021 we would not have to pay stamp duty because we would only be paying for the £200/211k transaction which is still below the £250k threshold for the above time frame?

Thanks in advance for any advice you can give!

If you bought from an RSL in 2017, then the SDLT on £389,000 for a staircasing between 1 July and 30 September 2021 would be £6,950.  The tax is a fraction of this, 200/389, so the SDLT payable would be £3,573.

Thank you very much for your response. 

So for clarity, we would not benefit from the staggered stamp duty holiday? 

The fact that the current transaction is only £200,000 doesn’t impact the stamp duty payable because it’s based on the total (despite having paid stamp duty previously)?

Sorry I’ve been struggling to get my head around this! 

SDLT_Geek

SharedOwner456 said:

Thank you very much for your response. 

So for clarity, we would not benefit from the staggered stamp duty holiday? 

Yes, you are benefitting from the tapered holiday.  The £6,950 calculated above is £2,500 less that it would have been outside of the holiday.  So your actual saving is 200/389 of this, so £1,285.

The fact that the current transaction is only £200,000 doesn’t impact the stamp duty payable because it’s based on the total (despite having paid stamp duty previously)?
Sorry I’ve been struggling to get my head around this! 

The fact that the current transaction is £200,000 does have an impact, but to work out the SDLT due on the £200,000 you have to factor in the £189,000 paid.  Assuming that was paid to the social landlord in 2017.  OP has not answered that point, so this thread might be going off at a tangent!