Angela Rayner’s Stamp Duty Land Tax problem

The Deputy Prime Minister has landed herself in a bit of hot water over the Stamp Duty Land Tax (SDLT) paid in respect of the purchase of a home in Hove. It is claimed that she underpaid SDLT to the tune of £40,000. How could this have happened? The answer lies in the rules which apply when a person purchases an additional home.


A higher rate of Stamp Duty Land Tax is payable when an individual purchases an additional home.


The rules relating to the purchase of an additional home are set out in schedule 4ZA of Finance Act 2003. They state that if a person purchases a home for more than £40,000 and, at the end of the same day as the effective date of that purchase:

 

  • that person also has a “major interest” in a dwelling other than the purchased home, and
  • the market value of the interest in that other dwelling is more than £40,000,

 

that purchase is a “higher rates transaction”.


In Angela Rayner’s case, SDLT was originally paid on the basis that she did not have a major interest in any other dwelling on the date she purchased her property in Hove. This was a mistake.


An anti-avoidance rule in paragraph 12 of Schedule 4ZA says that where a minor child has an interest in a dwelling by virtue of being the beneficiary of a trust, the interest in that property is deemed to be held by the parent of that child.


Because of paragraph 12, Angela Rayner was deemed to hold a major interest in her Ashton-under-Lyne property with a market value in excess of £40,000 at the time she purchased a home in Hove. The Hove purchase was therefore a higher rates transaction. SDLT due in respect of that transaction (assuming the purchase price to have been £800,000) was £70,000. Angela Rayner only paid £30,000 hence the shortfall of £40,000.


Lessons from the Case


If it were the case that Angela Rayner had not attempted to “dodge” the full amount of SDLT, it certainly underlines the risks of relying solely on conveyancing solicitors for matters involving complex tax legislation. Conveyancers are primarily trained and insured to deal with the mechanics of property transfers, title issues, and registration at HM Land Registry. While they routinely handle the submission of SDLT returns, their role does not extend to providing detailed analysis of intricate anti-avoidance rules or the nuanced interaction between property ownership and tax law, and certainly not where trusts are involved.


Where significant sums of tax are at stake, purchasers are far better advised to obtain input from a specialist tax adviser. A tax specialist would have identified the impact of paragraph 12 of Schedule 4ZA and advised that the higher rates of SDLT applied. The oversight in this case illustrates the real financial consequences of not seeking tailored tax advice at the outset of a transaction.


Image: Angela Rayner MP, Deputy Prime Minister (Ashton-under-Lyne, Labour) © House of Commons

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