Chancellor Rishi Sunak recently announced an extension of the stamp duty holiday, which will now end on the 30th June 2021. If you’re in the process of buying a property, do you know how you could be affected if your transaction isn’t completed before the 30th June? Senior Associate, Pauline Hodgson, answers some frequently asked questions below:
Does the SDLT holiday apply from the exchange date or the date of completion?
SDLT is payable on completion of the transaction as this is the “Effective Date of Transaction”. Therefore it is the amount of SDLT that is payable on the date of completion that becomes due and you have 14 days to pay it. Your solicitor will usually deal with this on your behalf as part of the post completion work they do for you. Therefore if the completion date is after the SDLT holiday ends then you will not benefit from the SDLT holiday. The holiday is a relief on SDLT payable on the first £500,000 of the price paid for a residential property and this will continue to apply until 30 June 2021. Following this date there will be relief on tax payable on the first £250,000 of the price paid for residential property until 30 September 2021. The amount that you will pay, both inside and outside of the relief period, will also depend on whether you have an interest in any other property on the date of completion (if you are not replacing your main residence) and, after 1st April 2021, whether or not you are a non-UK resident.
Will I incur SDLT if my property purchase is not completed by the deadline?
SDLT is payable on the day of completion so if the purchase is not completed before the deadline, and the purchase price would otherwise have attracted a liability to pay SDLT if it were not for the relief offered by the SDLT holiday, then you will have to pay SDLT. The amount you will have to pay will depend on the rules in place on the date of completion.
What should I do if I can no longer afford the property once SDLT is added to the cost?
Anyone considering purchasing a property during the relief period needs to also consider whether or not they would be able to complete their purchase if SDLT became payable. If they were not able to complete the purchase if SDLT became payable then they would need to withdraw from the transaction. They would then be responsible for payment of their solicitors fees incurred and any disbursements paid out.
Will I be liable for any costs if I pull out of a house purchase as a result of the SDLT holiday ending?
It is likely that you will be liable for your solicitor’s costs for the work carried out and any disbursements incurred, such as for searches. If you have already exchanged contracts then you will also lose your deposit (usually 10% of the purchase price) under the standard conditions of sale. When you give authority to exchange contracts it is important to also factor in, so far as is possible, any delays that could be caused to the completion date that might be out of your control. For example, exchanging contracts with a completion date on the day the SDLT holiday ends would be inadvisable especially if you were having a mortgage or you were reliant on funds coming from a source outside of your control. If there were any delays in the funds reaching their destination by the completion date then you would become liable for payment of SDLT under the rules that apply on the date that completion does take place.
What if localised coronavirus has delayed my transaction from completing in time, can I be exempt?
As SDLT is payable on the date of completion there will be no exemption if your completion is delayed due to localised coronavirus. It may be possible to agree a clause in the contract allowing you to withdraw without penalty if you are unable to complete on the completion date set when contracts were exchanged but this would be subject to all parties in the chain agreeing such a clause. Alternatively you may wish to consider a simultaneous exchange of contracts and completion on the same day, although this is not always possible or practical. Until contracts are exchanged there is a risk that any party in the chain could pull out, yet you would also need to be fully prepared to move on the day of exchange of contracts and completion. This would mean, amongst other things, arranging removals, which would mean that you would be responsible for removal costs as well as your solicitor’s costs and disbursements if exchange of contracts and completion didn’t actually happen.
How can Ellisons help?
For most people, buying or selling their home is the largest financial transaction they will ever make, so it is important to get it right! Our Conveyancing Solicitors in Essex and Suffolk offer a wealth of experience and expertise in all aspects of residential property work and are able to offer advice on SDLT.