Stamp Duty Reform: Government dismisses call for change

The government has dismissed a call for reform of the stamp duty system, which would have meant the tax would apply when contracts were exchanged, not at completion.

Over 13,500 people signed a formal petition on the government website seeking the tax - and therefore, in the current circumstances, the stamp duty holiday as well - to apply when contracts are exchanged.

Surveyor Christopher Holland, who initiated the petition in the early spring, says some buyers are being trapped because of rapidly-rising prices, forcing them to miss out on the tax break when their purchases suddenly break the £500,000 holiday threshold. 

The issue is now coming to a head because the stamp duty holiday’s main phase ends on June 30, less than three weeks from now.

The petition says: “People are finding themselves becoming trapped in a scenario whereby house prices are much higher, and at the same time they will now miss out on the stamp duty holiday. People are being financially punished from both sides, this from a policy that was designed to do the exact opposite.

Exchanging contracts is exactly what it says. A contract, a legally binding agreement, to purchase a house often with an immediate 10 per cent deposit being paid. So why shouldn’t you benefit from the stamp duty holiday being triggered at that moment of exchanging contracts, rather than at the point of completion? 

“This will allow in particularly new build buyers, with continuous building delays due to Covid-19, to benefit from this policy.”

However, yesterday the government batted away the suggestion. 

A response to the petition said: “A contract is regarded as substantially performed when the purchaser takes possession of the property, or at least 90 per cent of the consideration is paid or provided …Completion and substantial performance are well understood and widely recognised legal concepts and using them to establish the relevant date of a transaction for Stamp Duty Land Tax provides certainty to home buyers and to HMRC.”

Here is the government’s official response in full: 

“The SDLT Holiday was extended at Budget 2021 in order to benefit transactions which were unable to be completed by 31 March 2021. The government does not intend to change the SDLT trigger point.

“On 8 July 2020, the SDLT nil rate band for purchase of residential property was temporarily raised to £500,000 until 31 March 2021. This was designed to stimulate the property market, where property transactions fell by as much as 50 per cent during the initial COVID-19 lockdown. 

“Earlier this year, many people were concerned that their transactions would miss out on the reduced rates due to circumstances beyond their control, including delays in the sector. 

“The Chancellor listened to those concerns and, on 3 March 2021, announced an extension in order to ensure that purchases that could not be completed by 31 March 2021 were still able to benefit from the relief. 

“The £500,000 nil rate band now applies until 30 June 2021. To help the market move back to the standard rates, from 1 July, the threshold at which SDLT becomes payable will be stepped down to £250,000, before it returns to the pre-COVID level of £125,000 from 1 October 2021. 

“The SDLT Holiday applies to transactions that are completed or substantially performed during the period. 

“A contract is regarded as substantially performed when the purchaser takes possession of the property, or at least 90 per cent of the consideration is paid or provided. 

“Completion and substantial performance are well understood and widely recognised legal concepts and using them to establish the relevant date of a transaction for Stamp Duty Land Tax provides certainty to home buyers and to HMRC. 

“The Government’s approach in extending the Holiday has ensured that all purchasers have had more time to complete their property transactions. If the SDLT system had been altered so as to be triggered at the point of exchange, that would have been a fundamental change to the way in which the tax is administered, and would have created additional uncertainty at a time of national crisis.”