The March 2011 budget introduced the following changes to Stamp Duty Land Tax (SDLT) including welcome relief for bulk purchasers of residential property for investment and letting.

SDLT rates

There are no changes to the main rates and thresholds for SDLT in the 2011 Budget.

Reform of Rules for Bulk Purchases of Residential Property

Legislation will be introduced in the Finance Bill 2011 to provide a relief for buyers of residential property who acquire interests in more than one dwelling from the same seller.

Under the current rules:

• A buyer who buys multiple properties from the same seller will pay SDLT on the total consideration given for the land. This can lead to the buyer paying a higher rate of tax than individual purchasers would have paid for the properties separately.
• Where there is a single transaction for the sale or grant of a lease of six or more separate dwellings, those properties will be treated for SDLT purposes as non-residential property (section 116(7), Finance Act 2003).

The new relief will have effect for transactions where the effective date is on, or after, the date on which the Finance Bill 2011 receives Royal Assent.

If the buyer chooses to claim the relief:

• Subject to a minimum rate of 1%, the rate of SDLT will be determined by the mean consideration. In other words, by the aggregate consideration divided by the number of dwellings.
• The dwellings will be treated as residential property no matter how many dwellings are involved.

The aim of this relief is to reduce the barrier to investment in residential property, and promote the supply of private rented housing.

Anti-avoidance

In the 2011 Budget, the government announced three legislative changes designed to ensure that certain SDLT avoidance schemes are ineffective.These anti-avoidance measures are set out in detail in HMRC’s note, Preventing avoidance: Stamp Duty Land Tax: Draft legislation and Explanatory Note, and they will be given effect by amending the FA 2003. The changes will come into force on 24 March 2011, although there are some transitional measures for arrangements entered into before 24 March 2011.

The anti-avoidance measures relate to the:

• Relationship between sub-sale relief and alternative property finance relief.
• Definition of “financial institution” for alternative property finance relief.
• Determination of consideration on exchanges of land.

First-Time Buyer Relief

In the March 2010 Budget, the former Labour government announced the introduction of SDLT relief for first-time buyers of residential property where the consideration does not exceed £250,000. In the June 2010 Budget, the government said that it would review first-time buyer relief taking into account its impact on affordability and value for money. The government has stated in the 2011 Budget that it will announce the outcome of this review in the autumn.

Withdrawal of Disadvantaged Area Relief

The government has announced that disadvantaged areas relief from SDLT and stamp duty will be abolished after 2012.The final date for abolishing the reliefs will be set out after consultation.

For further assistance on SDLT matters and bulk purchase of investment property contact Mark Sadler at kenneth elliott + rowe solicitors on 01708 757575 or email mbs@ker.co.uk