Chris Etherington

Written by: Chris Etherington

Chris Etherington

Partner

Stamp Duty Land Tax holiday should be phased out gradually

When the property market was thrown into turmoil following the first 2020 lockdown, transactions fell by 50% in April and May 2020 from the prior year. The Chancellor provided an immediate shot in the arm with the announcement of an ‘SDLT holiday’. 

The SDLT holiday involved full relief being temporarily provided on residential property purchases up to £500,000 between 8 July 2020 and 31 March 2021. The number of residential property transactions in October and November 2020 were higher than the same point in 2019, illustrating that the relief provided the stimulus needed and secured jobs in the sector.

The clear problem with withdrawing the SDLT relief with a cliff-edge deadline as is currently proposed is that it will penalise some property purchasers, through no fault of their own, and jeopardise existing transactions.

In addition, uncertainty posed to the economy could result in lenders reassessing their position in transactions and it is already being reported that some lenders are withdrawing offers late in the process.

Failure to complete or “substantially perform” the contract means that SDLT will not be triggered. As a result, even buyers who have exchanged contracts on or before the 31 March deadline are unlikely to benefit from the SDLT holiday as the rules currently stand. 

There have already been petitions calling for the Government to extend the SDLT holiday, but cold water was swiftly poured on such requests as SDLT is an important source of revenues for the Exchequer.

A reasonable and fair solution would be to introduce a phased withdrawal of the SDLT relief. 

For example, one approach might be to allow transactions to continue to benefit from the SDLT holiday if it can be evidenced that reasonable steps were taken to try and complete the purchase before 31 March 2021 but completion was delayed due to issues relating to the pandemic. 

All holidays have to come to an end, but those currently involved in property transactions could suffer far more than a case of the post-holiday blues. It is hard enough buying a property; government tax policy should not be compounding the difficulties faced by purchasers and exacerbating a potential slump in the market.  

 
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