Stamp duty question when staircasing, Shared Ownership

SDLT_Geek

smallworld12 said:

Sorry to come back on this one. 

Solicitor is stating the £1125 is payable. 

Are you able to expand on how you got to the £667 figure so I can go back and just challenge that in any way please 

My calculation is set out in my post.  I got to £1,125 part way through. 

What the solicitor has not done is to apply the last step, being to take the fraction £107,500 / £181,250 as required by the linked transaction rules in Finance Act 2003 section 55(1C) Step 3.

smallworld12

Okay so I think I’m starting to understand and wow isn’t it a mine field!

and thank you so much for your help

You have given me the freehold SDLT of £667.22 but I believe I now pay for the original lease hold SDLT of £457.78 which totals the £1125

Although I was exempt the 1st time round, and did not have to pay any SDLT at the time. (But could have if I was advised correctly by the solicitor at the time, which would of avoided any SDLT for this transaction)

I think the linked transaction rules override any relief when later interest is acquired from the same seller.

So HMRC charge for the entire combined consideration and not just the freehold piece.

SDLT_Geek

smallworld12 said:

Okay so I think I’m starting to understand and wow isn’t it a mine field!

and thank you so much for your help

You have given me the freehold SDLT of £667.22 but I believe I now pay for the original lease hold SDLT of £457.78 which totals the £1125

Although I was exempt the 1st time round, and did not have to pay any SDLT at the time. (But could have if I was advised correctly by the solicitor at the time, which would of avoided any SDLT for this transaction)

I think the linked transaction rules override any relief when later interest is acquired from the same seller.

So HMRC charge for the entire combined consideration and not just the freehold piece.

The rule about having to "revisit" the SDLT due at the time of the grant of the lease, only applies where the lease was granted before 12 March 2008.  Yours was granted much later.  The guidance here https://www.gov.uk/guidance/sdlt-shared-ownership-property confirms it.  It takes a bit of understanding, but here is some key wording: "But if the first grant of the lease took place on or after 12 March 2008, this transaction is excluded because it doesn’t count as linked with the rest of the transactions."

In your case you should only have to pay SDLT on the staircasing transaction, not any more on the grant of the lease itself.  It is a form of "one way linking" which is a bit mind bending until you get used to it.

smallworld12

This is so interesting and thank you for sharing that. It’s one huge rabbit hole!

Ive gone over everything again using your guidance and the clause but im now getting;

Initial transaction 2018 - first time buyer relief 0% SDLT 

current staircasing transaction still under threshold for a none first time buyer - 0% SDLT

Exceeding 80% in shares would usually trigger the linked transactions but with the exclusion for leases after 12 March 2008, HMRC would only look at the latest transaction which still falls below the threshold. And the original transaction is excluded from retrospective SDLT re-assessment.

which is now leaving me at £0 SDLT…

or is this where the finance act 2003 section 55 (1C) kicks in?

SDLT_Geek

smallworld12 said:

This is so interesting and thank you for sharing that. It’s one huge rabbit hole!

Ive gone over everything again using your guidance and the clause but im now getting;

Initial transaction 2018 - first time buyer relief 0% SDLT 

current staircasing transaction still under threshold for a none first time buyer - 0% SDLT

Exceeding 80% in shares would usually trigger the linked transactions but with the exclusion for leases after 12 March 2008, HMRC would only look at the latest transaction which still falls below the threshold. And the original transaction is excluded from retrospective SDLT re-assessment.

which is now leaving me at £0 SDLT…

or is this where the finance act 2003 section 55 (1C) kicks in?

You have fallen foul of the one way linking wormhole!  Time and space is distorted here:

(a)  When you come to assess SDLT on the staircasing out, it is assessed on the basis that it was linked to the 2018 transaction.  Hence the initial step of working out SDLT on £73,750 + £107,500 is £181,250.

(b)  When you come to think about the 2018 lease, you do not need to revisit it under the linked transaction rules, because that would only apply to pre 12 March 2008 leases.

smallworld12

Right okay this does make sense. Especially when broken down this way.

really appreciate your help - thank you so much!