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Stamp Duty Land Tax 'Holiday' - Time's Running Out

on Tuesday, 05 January 2021.

To help the economy during the coronavirus (COVID-19) pandemic, a Stamp Duty Land Tax (SDLT) 'holiday' increases the SDLT threshold to £500,000 for property sales in England and Northern Ireland until 31 March 2021.

A buyer completing on a main residence costing up to £500,000 will not, therefore, pay any SDLT. More expensive properties will only be taxed on their value above that amount.

If the property being purchased is not a 'main residence', then this also applies.

The SDLT holiday stimulated the housing market, with many buyers trying to complete their purchases before normal rates returned.

However, time is running out. A typical property purchase takes three to four months to complete. Mortgage companies and conveyancers are all very busy and there have been other factors which have slowed down the process for many. Anyone finding a property to buy now will be lucky to get the purchase progressed up to exchange of contracts and completion by 31 March.

How Could It Be Achieved?

The 'effective date' of a transaction determines when liability to SDLT arises. Generally, the effective date is when that land transaction is completed, ie when the purchase price is paid over, the buyer is handed the keys and the title is legally transferred to the buyer. But where such a contract is 'substantially performed' before it is formally completed, the contract is treated as if it were itself the transaction provided for in the contract.

What Does 'Substantially Performed' Mean?

Broadly, 'substantially performed' means:

  • Any payment of rent is made. This could be achieved by exchanging contracts before the SDLT holiday deadline, and entering into a rental agreement with the seller, then paying rent upon contract exchange and not completing the purchase for a few months.
  • Most of the purchase price is paid. This would not work for anyone needing a mortgage, but if buying with cash and the sellers are unable to move out, the money could be paid and the sellers could remain in the property for a few months.
  • The purchaser is entitled to possession of the subject matter of the transaction. Similar to the first point, you could enter into a licence to occupy on exchange of contracts (before the SDLT holiday deadline).

It might be possible to substantially perform a property purchase before the deadline but legally complete the purchase afterwards and still benefit from reduced rates. Specialist advice should be sought before attempting any such measures.

Coronavirus real estate 2


For specialist legal advice on the Stamp Duty Land Tax 'holiday', please contact David Marsden in our Commercial Property team on 07770 413 164, or complete the form below.

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