The stamp duty tangle – a useful lesson

The former Deputy Prime Minister Angela Rayner’s recent problems with stamp duty land tax (SDLT) offer a salutary lesson.   

In early September, the Deputy Prime Minister (and Housing Secretary) resigned after discovering that she had underpaid SDLT by £40,000 on the purchase of a flat in Hove. 

It was an ironic omission on Rayner’s part to overlook the origins of the additional tax liability. The stamp duty surcharge was introduced by Conservative Chancellor George Osborne in the 2015 Autumn Statement at 3%, effective from April 2016, before being raised to 5% nine years later by Rayner’s Cabinet colleague Rachel Reeves in the Autumn Budget.

The tax aimed to discourage buy-to-let and second home purchasers, who were often shopping for similar properties to first–time buyers in a pressured housing market. The basis of the additional tax required the buyer to pay extra SDLT if they owned another residential property on the same day that another property was bought. That may sound straightforward in principle, but the legislation required to implement it was anything but, involving the closure of various loopholes—such as purchasing a second property through a company or using trusts to transfer ownership.

It was the latter anti-avoidance measure which tripped up Angela Rayner. She had sold the 25% interest in her first home, in Ashton-under-Lyne, to a trust for the benefit of her disabled child before buying her Hove apartment. Paragraph 12 of Schedule 4ZA of the Finance Act 2003 deemed that such a sale meant that Rayner was still treated as owning the property for SDLT purposes.

While Rayner had sought guidance on her SDLT position, the advice she received was qualified by the acknowledgement that it did not constitute expert tax advice and was accompanied by a suggestion, or in one case a recommendation, that specific tax advice be obtained. Had Rayner paid heed to those warnings, she would not now be facing a potential tax penalty of up to £12,000, in addition to the £40,000 extra SDLT.

The broader lesson from this entire episode is clear: when advice is required, particularly in financial matters, it is essential to seek out a genuine expert who will stand by their professional judgement.

The Financial Conduct Authority does not regulate tax advice. 

---

Important information:

This blog is for general information only and does not constitute advice. We recommend you speak to your financial adviser before making any decisions. The information is aimed at retail clients only. No statements or representations made in the article are legally binding upon Shackleton Advisers Limited or the recipient.

All references to taxation are in relation to UK taxation and are based on our current understanding of UK laws and HMRC practices. Tax reliefs may change in the future and may not be maintained.  Tax treatment is based on your individual circumstances. All other information is based on our understanding of current legislation and regulation which may be subject to change.