Newsletter - November 07

Stamp Duty Land Tax 

SDLT is a tax on transactions, not documents. It is chargeable on transactions involving residential property where the consideration is more than £125,000 and on those involving commercial or mixed use property where the consideration is more than £150,000. The tax is charged as a percentage of the purchase price. The initial rate is 1% of the chargeable consideration and this increases to a maximum rate of 4% where the chargeable consideration exceeds £500,000. (See Table 1 below) 

On a straightforward house purchase of £300,000, SDLT of £9,000 will be payable by the purchaser. When you buy a property or land, you must fill in a land transaction return (SDLT1) and send it to HMRC. Your conveyancer/solicitor will normally complete the return for you as part of handling the transaction. However, you are legally responsible for the information supplied. 

Once the return has been processed and the appropriate amount of tax has been paid, a ‘land transaction certificate’ (SDLT5) is issued. This certificate is needed when applying for registration of title or documents with the Registrars of Scotland. If the land transaction return or payment is not sent to HMRC within 30 days of the date of the transaction, penalties and interest can be payable.

As announced in the Pre Budget Report, from 1 October 2007 all new zero carbon homes will enjoy a new zero rate of SDLT up to a house value of £500,000. The relief will be limited to a period of five years from this date. For properties over the £500,000 mark the normal rate of 4% applies but there is a reduction of £15,000 on the duty payable.   

A zero carbon home is one that generates as much power as it uses over the course of a year and therefore has net zero carbon dioxide (CO₂) emissions. To achieve this, it will have very high levels of insulation in the walls and roof, windows and doors with high thermal performance and heat exchangers to make sure there is a 95% recovery of heat in the air ventilation system. The property will be efficiently heated using sunlight and will have renewable energy generating devices such as biomass fuelled hot water and space heating, small scale urban wind turbines to generate electricity, ground heat pumps and possibly other means like small scale hydroelectric generation to create the energy which is then stored or returned to the national grid. On a £400,000 house, the SDLT saving of £12,000 will help towards the investment in technology necessary to make the home energy efficient. 

Table 1 

TRANSPORT HOME FOR EMPLOYEES WORKING LATE 

If you reimburse or pay for the transport costs of employees who work late then your payment may be tax free to your employee.   For payments to be tax free, certain conditions have to be met: 

·        The transport is between the employee’s home and workplace;

·        The number of previous occasions in a tax year where such provision has been made is less than 60;

·        The employee is required to work later than usual and until at least 9.00 p.m.  So a manager who is contracted to work until 11.30 p.m. would not, therefore, qualify;

·        Such occasions occur irregularly;

·        By the time the employee ceases to work, public transport has ceased to be available or it would be unreasonable to expect the employee to use it;

·        The transport is by taxi or similar private road transport; HM Revenue & Customs believe that, in some instances, this relief may be being abused where, for example, an employee stays until after 9.00 p.m. and takes a taxi home while public transport is still available. The relief is, however, valuable where emergencies arise and staff stay on to finish urgent work.

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