New build home buying incentives could reduce SDLT liability

Conveyancers ‘rarely adjust’ new build contract prices to take advantage of developer-funded incentives, which can be offset against stamp duty liability according to accountancy firm Relatus.

There is, says Relatus spokesperson Louise Wise, an acknowledgement that HMRC applies ‘a narrow interpretation’ of the rules, leading to an ‘overly cautious’ approach from conveyancers due to the high risk of interest and penalties for getting it wrong. Wise explained:

“Many developers will offer a potential purchaser of a new build property one or more incentives to make the property more attractive, and they will be detailed in the CML Disclosure of Incentives form.

“Many will make no difference to the SDLT calculation, but there are some incentives that should not form part of the consideration for SDLT purposes. The correct treatment of such incentives could save your clients money.”

HMRC defines the ‘chargeable consideration’ paid for a property as ‘anything that is paid for assets that form part of the land or property’. Any incentives falling outside this definition should be excluded from the SLDT calculation but, according to Relatus, many applicable incentives are missed. Wise continued:

“Conveyancers rarely adjust the TR1/TP1 or contract price when completing the SDLT1. Chargeable consideration should be reduced for the likes of developer-funded deposit assistance, SDLT contribution and legal fees assistance.”

And, Wise suggests, ‘clients will be grateful for the savings’. She concluded:

“HMRC has a restrictive approach to SDLT and will apply a narrow interpretation of the rules meaning the risk to a conveyancer is great, particularly given the additional interest and penalties for any underpayment. This can result in an overly cautions SDLT treatment which, whilst protecting your client and firm from any adverse action by HMRC, will mean your clients may be paying more SDLT than they need to.”