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Stamp duty surcharge has unintended consequence

Stamp duty surcharge has unintended consequence

SDLT implications for flat owners.

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Collective enfranchisement refers to the process where leaseholders in a building join together to buy the freehold of the building. Stamp Duty Land Tax imposes 3 percent higher tax rates on purchases of ‘additional’ dwellings (such as second homes and buy to lets) by individuals. It is not obvious why those two concepts should interact. Indeed, the Government recognised this by providing an exception to the higher rates where the buyer has a prior interest in the purchased dwelling. Regrettably, for a combination of reasons, the higher rates can apply harshly to collective enfranchisement transactions.

In an article for Tax Journal*, Sean Randall discusses how a higher rate of Stamp Duty Land Tax could apply to collective enfranchisement transactions and calls on the Authorities to rectify the anomaly.

* First published in Tax Journal on 11 January 2019. Reproduced with permission.

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