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Stamp Duty rules for first-time buyers a ‘hard pill to swallow’ – Goldsmith

by: Eddie Goldsmith, chairman, Conveyancing Association (CA)
  • 19/04/2016
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Stamp Duty rules for first-time buyers a ‘hard pill to swallow’ – Goldsmith
A story published by Mortgage Solutions this week looked closely at first-time buyers' treatment under the new Stamp Duty rules. Eddie Goldsmith discusses the impact on fledgling buyers.

Now that we are in the post-Stamp Duty deadline period it’s safe to say that we’ve moved from the ‘get everything completed before 31 March’ rush to the ‘understanding the practical implications of the new rules’ phase. By this I mean that it’s now about helping clients understand whether they are liable to pay the extra 3% Stamp Duty charges for additional properties, and if so, why?

Understandably, a lot of clients will be hopeful that they are not going to be caught by the increased charges but unfortunately in quite a lot of areas, the rules are pretty clear cut. Having said that, and as is always the case with a move from the theoretical to the practical, there are some situations which are more complicated.

We saw this pretty clearly as soon as we entered April with the focus on ‘granny annexes’ and whether this could be classed as a second property. Now, following an intervention by Sir Eric Pickles, it looks as if the grannies and their annexes have been spared and this won’t count as an additional property alongside the main residence.

Good news no doubt for those attempting to purchase such properties; indeed good news for the sellers too who may have faced far less interest if prospective purchasers were being put off by the extra costs.

But we have seen further complications as reported by Mortgage Solutions this week regarding the somewhat unfair situation around whether a first-time buyer, who may own an investment property through inheritance, is liable to pay the extra Stamp Duty costs on the purchase of their first main residence.

Now, this does seem unfair because existing owners of both a main and investment property who are selling their main residence to purchase another would not be liable for the higher Stamp Duty rate, yet the first-time buyer is even though they may never have lived in that investment property at all. The issue here comes down to the rules and their focus on ‘replacing a main residence’ rather than buying one for the first time, but still it seems an incredibly hard pill to swallow for first-timers who are genuinely buying their first home.

And here, in full effect, are the types of tricky situations that are likely to be raised by the change of rules. It puts some considerable pressure on those providing advice services to clients because, undoubtedly they will want to have complete clarity about where the extra charge is, and isn’t, payable. Especially when they will be responsible for letting HMRC know.

In the Conveyancing Association’s response to the Stamp Duty consultation, we were keen to express the view that conveyancing firms shouldn’t have to police this type of transaction and it was ultimately up to the client to be certain about whether they should be paying more. That said, clients are going to be relying on parties such as the mortgage, tax and legal advisers, and it is fair to assume they will be quick to act should they feel they have been misadvised.

Given this situation, it’s imperative that we have strong lines of communication between all parties and we are able to confidently advise the client in this area. If not then we can not only expect the loss of that client but perhaps further stronger action which nobody would welcome.

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