Thursday, Mar 25, 2010
Who qualifies for the stamp duty change? Its not simple!
Citywire: What is a first time buyer?
How on earth is HMRC going to enforce the stamp duty change that is supposed to benefit only FTBs? According to this story it is fairly certain it can do it, even preventing those people with homes abroad from qualifying as FTBs.
Posted by smithers @ 11:56 AM (3515 views) Add Comment
10 Comments
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1. little professor said...
Alistair Darling increased the starting point for stamp duty from £125,000 to £250,000 for two years for first time buyers in the Budget yesterday.
But there has been much confusion over what exactly the definition of a first-time buyer is and who can benefit from the chancellor’s announcement.
According to HM Revenue & Customs, a first time buyer is ‘a person who has not acquired a freehold or leasehold interest in residential property in the UK or an equivalent interest elsewhere in the world’.
No returners
This means if you have owned a property at any point in the past, even if you do not own one anymore and have rented for years, you will not be considered a first-time buyer.
However, the Council of Mortgage Lenders (CML) said this is unusual, as first-time buyers typically include a high proportion of ‘returners’, who have previously owned a property but no longer do so.
No properties abroad
HMRC’s definition also means that if someone has owned a property abroad, they too will not be classified as a first-time buyer, even if it is their first time buying property in the UK.
Quizzed by Citywire about how it would enforce this rule, HMRC was unfazed, claiming the majority of people taking advantage of the change would be UK buyers. But if someone is found out to have been dishonest they will face stiff penalties, HMRC warned.
Tough on couples
You will not be eligible for first-time buyer tax relief if you are buying a house together with a partner who has previously owned a property – even if you never have.
And similarly, if you have previously owned a property jointly and now want to own a house in your own name, you will also be unable to claim a stamp duty holiday.
Difficult to enforce
Some industry members have expressed concern over how the government plans to implement its new stamp duty threshold for first-time buyers.
John Whiting, tax policy director at the Chartered Institute of Taxation, said: ‘The idea sounds good on the surface but runs the risk of there being complex definitions of first time buyer that cause anomalies and difficulties in practice.’
The CML have also said that although it would be more expensive, it would be far easier to exempt all properties under £250,000 from stamp duty, rather than to impose a first-time buyer restriction.
2. str 2007 said...
There was a discussion on here the other day when I was saying how surprised I was at how the Inland Revenue didn't seem to know who owned which houses (currently). Despite the fact they seem to know exactly who owns which car (that change hands alot more frequently and relocate - unlike houses).
They are now claiming that not only do they know who owned houses in the past, but who has owned property abroad.
I find this fascinating as they don't seem to be chasing BTLers and second home owners for tax, something which would IMO bring in significant revenue.
I wonder why that is ? anything to do with the fact that most MP's are BTLers and/or 2nd homeowners by chance ?
3. str 2007 said...
Also this 'no tax under £250k sounds great but in practice £2.5k saving on £250k isn't that much and it's likley all houses much under £250k will simply increase 1%.
I guess it will have a stronger pulling effect on houses priced between £250-£275k.
4. timmy t said...
No doubt the increase in revenue from the higher tax on £1m+ properties will be spent on an army of McKinsey consultants brought in to draught a policy on how to determine whether somebody is an FTB. The whole Stamp Duty bracket system is a farce. If they want to encourage buyers back to the housing market then why not charge additional tax for additional property, or better still go with LVT.
5. This comment has been removed as it was found to be in breach of our Blog Policies.
6. tenant super said...
@3
"I guess it will have a stronger pulling effect on houses priced between £250-£275k."
How many FTB except those with very wealthy parents or those looking at shared ownership would be looking at properties £250-£275k anyway? Most buying at that level are STR. So I agree there will be some drag on this bracket but not perhaps that much.
They might be able to check enforce this for those who bought in UK but I can't see HMRC checking registries abroad. In Ireland there is no central register so they would have to go through every district council.
I don't think yesterday's announcement is going to make much of a difference to house prices and since the holiday is for two years ( and many expect to see the bottom in prices some time in 2011) there is no imperative to buy.
@ 5 happy mondays
ha ha ha ha ha !
7. mark wadsworth said...
The definition of FTB is simpler than that - you're all starting from the wrong end:
Q - is the vendor an elected Member of Parliament in the UK?
If Yes - the SDLT exemption applies.
Else - SDLT at 1% applies.
8. timmy t said...
MW - almost right...
Q - is the vendor an elected Member of Parliament in the UK?
If Yes - the SDLT exemption applies and the amount should be added to the asking price.
Else - SDLT at 1% applies.
9. uncle tom said...
Considering that this measure was a flagship of the budget, the failure to think through the basic question 'what definition of first time buyer can be effectivley validated' - really underlines the systemic and total incompetance of this administration.
- It really beggars belief...
10. mark wadsworth said...
Timmy T, I stand corrected.