The 3% stamp duty land tax (SDLT) surcharge on second home property sales will exclude annexes and so-called granny flats despite initial concerns that the measure would create a dual property transaction.
The original Finance Act indicated that annexes would be caught by the new rules.
David Gauke financial secretary to the Treasury, stated in Parliament:
‘I have been made aware that the Bill as drafted might lead to some main houses with an annexe for older relatives attracting the higher rates of SDLT intended to apply to additional properties. I am happy to reassure the House that that is not our intention and the government will table an amendment in Committee to correct the error and ensure fair treatment for annexes.’
He added: ‘We certainly do not want to discourage people who wish to create an annexe for an elderly or disabled relative, providing them with support close at hand.’
The amendment to the budget will be issued at Committee stage and will clarify that annexes will not be subject to the 3% SDLT surcharge.
Once the amendment is published, HMRC will publish detailed guidance before the Finance Bill becomes law in July 2016.
The higher rate SDLT surcharge came into force on 1 April. It appears that any subsequent sales involving an annex will not be subject to the 3% levy, although it is possible that sellers would have to claim a refund from HMRC in the event of the charge being made. This will be clarified once the HMRC guidance is issued.
There are a number of criteria under which an annexe qualifies as a single sale transaction:
- the annexe must be in the same grounds as the main property,
- will have all the facilities of a main home,
- is not worth more than one third of the total cost of the transaction value.
It is believed that the change will affect approximately 1,000 property sales a year.