A TAX LOOPHOLE WAITING TO HAPPEN?

26/03/2010

The recent Budget has changed the position on Stamp Duty Land Tax in favour of first time buyers from 25/03/2010 until 25/03/2012 (this new relief is limited to 2 years).

A first time buyer who is buying a residential property to live in for their own use will not pay stamp duty on a residential property which costs less than £250,000 for that 2 year period.

Non first time buyers will still be liable to pay 1% on anything between £125,000 and £250,000.

The Council of Mortgage Lenders have described this new policy as “a tax loophole waiting to happen”. The reason being that it is hard to see how the Revenue will police who is a first time buyer.

A first time buyer is defined as someone who has not acquired a freehold or leasehold interest in residential property anywhere in the world. If there are 2 people buying the property then neither of them must have owned any property anywhere, if one of them has then they are not first time buyers.

It will fall on the honesty of the buyer to confirm whether or not they have owned a property before, it is difficult to see how it will be checked by the Revenue, particularly when it refers to a property anywhere in the world. As solicitors this is certainly not something we can check, it will fall to the honesty of the buyer. I can envisage that there will be all sorts of schemes that people will come up with to try and avoid the tax and it will be a challenge for the Revenue and indeed solicitors to see that the exemption is being used when it should not.

For advice on stamp duty land tax and buying a home, contact Carole Fox at Rothera Dowson on 0800 124 4012.