The midnight deadline for the 3% stamp duty surcharge on additional properties was supposed to minimise any distortion in the marketplace according to the Chief Secretary to the Treasury David Gauke MP.
Speaking at a session of the public bill committee, the MP for South West Hertfordshire also confirmed that so-called “Granny Annexes” would be exempt from the charge when purchasing the main residence attached, following an amendment to the 2015 Finance Bill.
Another correction will mean that those purchasing with Islamic finance will not be charged unfairly either.
David Gauke MP said: “With regard to consultation, the reforms to SDLT came into force from midnight following the Budget. That early introduction was needed to minimise any distortions in the commercial property market, including the impact on construction and development projects, that may have resulted from early announcement or consultation of a future change to non-residential SDLT. Recognising that some purchasers will have entered into legal agreements to purchase property, and to further minimise any potential market distortion, the Government are putting into place transitional rules for purchasers who have exchanged contracts but not completed their purchase before 17 March in order to ensure they do not lose out. ”
The government have also ruled out higher rates for “significant investors” – those with more than ten properties, such as housing associations or large scale buy to let investors, with the government believing it won’t have any negative effect on housing supply.
Mr Gauke continued: “The Government have tabled three groups of amendments to rectify certain technical issues that have become apparent since the introduction of the higher rates. The first set, amendments 29 to 39, will ensure that so-called granny annexes will be exempt from higher SDLT when purchased with a main residence in the same transaction. We have decided that it would be unfair to change the higher rate when someone buys a main house that includes self-contained living space for an elderly relative. The Bill as drafted would usually but not always exclude that, so we are amending it to put this beyond doubt. An annex will be defined by objective criteria. It must be on the same site as the main home and worth no more than one third of the total transaction value to ensure that the regime remains robust against avoidance. I again thank my right hon. Friend the Member for Brentwood and Ongar (Sir Eric Pickles) for bringing this issue to my attention.
“The second correction, in amendment 40, will allow the Government to ensure that those who use Islamic finance to purchase their main residence will not be unfairly caught by the higher rate. This will ensure that the Islamic finance provisions are consistent with those that already exist within SDLT legislation.”