Buyer is Staircasing but we had to pay stamp duty

MrWrighty

We have an odd situation. Mum bought a 60% share of a flat. The flat has been empty for a while as mum moved in to care.

We have just completed the sale where the buyer staircased to buy 100% of the property at the time of purchase.

Because of this process and before completion the property became ours at 100% ownership until the exchange completes which can be a matter of minutes or hours. We have had to pay stamp duty on this even though as the seller mum has not benefitted from owning 100% of the property. This doesn't seem fair as the balance of the purchase (40%) goes to the landlord. Once the exchange is complete the new buyer will also have to pay stamp duty. Surely there must be an exemption for this process where the exchange happens within a few hours of the of completion.

loubel

You should be able to claim sub-sale relief to avoid this.

SDLT_Geek

MrWrighty said:

We have an odd situation. Mum bought a 60% share of a flat. The flat has been empty for a while as mum moved in to care.

We have just completed the sale where the buyer staircased to buy 100% of the property at the time of purchase.

Because of this process and before completion the property became ours at 100% ownership until the exchange completes which can be a matter of minutes or hours. We have had to pay stamp duty on this even though as the seller mum has not benefitted from owning 100% of the property. This doesn't seem fair as the balance of the purchase (40%) goes to the landlord. Once the exchange is complete the new buyer will also have to pay stamp duty. Surely there must be an exemption for this process where the exchange happens within a few hours of the of completion.

There is a reference to a form of subsale relief (called pre-completion transaction relief) here: https://www.sharedownershipresources.org/an-expert-on/stamp-duty-selling/

Here is an extract from an approved summary of a meeting with HMRC on 8 April 2022:

"3.  Pre-completion transaction relief can apply on a back to back staircasing and sale on (provided the other conditions for relief are met).  It is no objection that (for SDLT purposes) a share in the property is acquired and the whole of the lease is assigned onwards.  The embedded right in the lease to staircase provides the necessary contract to acquire a share.  HMRC have given clearances to confirm that PCT relief is available, but have not published their view."

MrWrighty

Thank you all for your assistance, I've passed the details on to our solicitor.

MeteredOut

MrWrighty said:

Thank you all for your assistance, I've passed the details on to our solicitor.

That is a rather worrying thing, that you had to inform your solicitor about this...

MrWrighty

MeteredOut said:

MrWrighty said:

Thank you all for your assistance, I've passed the details on to our solicitor.

That is a rather worrying thing, that you had to inform your solicitor about this...

The solicitor has raised this as a tax issue, and he has informed me that the HMRC rules are not clear on the point I raised and there is no official mention of the "from an approved summary of a meeting with HMRC on 8 April 2022" mentioned above in the official SDLT rules. No link was posted to the excerpt above so we are struggling to find this evidence. He is referring this to a tax expert. To be fair, conveyancing solicitors are not experts in tax law.

MrWrighty

Confirmation that SDLT is not payable on this transaction. Tax expert contacted HMRC this morning to confirm this. There is no official HMRC publication available on this subject even though it was discussed in 2022, only by speaking to them were they able to confirm nothing is due. HMRC said that something should be released in due course.