Tick Tock Tax Clock - SDLT reforms

Date published

25/01/2019

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This article was co-authored by Rachael Wilding, Legal Assistant, Manchester.

On 1 March 2019, Her Majesty’s Revenue and Customs (HMRC) is reducing the time limit that purchasers have to file a Stamp Duty Land Tax return (SDLT).

These changes have been a long time in the making and will impact the procedures needed to be followed by those acquiring property, so as not to fall fowl of any fines.

Background

As early as the Autumn Statement 2015, the government announced that the time period for filing a SDLT return and paying any tax due, would be reduced from the current 30-day limit. In the Autumn Budget 2017, it was finally confirmed that these changes would be implemented with effect from 1 March 2019.

The changes will be made law through the Finance (No.3) Bill (the Bill), which will amend the Finance Act 2003, the current law that governs SDLT filing and payment provisions. The Bill was introduced into Parliament on 1 November 2018 and has made its way through the House of Commons. The Bill is now with the House of Lords and is due to have its second reading on 4 February 2019. As we are so close to the 1 March deadline, it is not clear whether the Bill will have passed into law by the time the changes come into place.

Irrespective, HMRC have confirmed that this will not cause any delays to the changes coming into effect on 1 March 2019. Therefore, should the Bill not receive Royal Assent in time, the changes will take effect under a Provisional Collection of the Taxes Act 1968 Resolution that was passed on 1 November 2018.

Proposed changes

For transactions which complete on or after 1 March 2019, the time limit for filing a SDLT return and paying the tax due to land transactions, will be reduced to a 14 days.

Should parties fail to meet this deadline, the same penalties as before, will be incurred, as follows:

Return submitted Fine
Within 3 months Fixed fine of £100
Over 3 months but up to 1 year Fixed fine of £200
More than a year Penalty can be up to the amount of SDLT due
Return is submitted within 14 days but the tax is not paid within 14 days Interest on the tax due accrues daily at a rate of 3.25%

There are some property transactions that will be exempt from this change, continuing to remain subject to the 30-day deadline. These will be rare and are in relation to instances where a further return is required, following the filing of an original return, such as transactions for uncertain consideration, or new leases, which are re-notifiable due to the continuation or renewal of the lease.

Comment

HMRC have advised that many SDLT returns are already completed, along with payment of the tax, within 14 days. Whilst this may be true of the more straightforward dealings, we would suggest that the time limit of 30 days is a far more realistic and achievable time period especially on complex transactions, such as the sale of a freehold property that is subject to numerous leases.

To avoid missing this 14-day deadline when the changes go live, we would advise that you change your practices to ensure that you are reviewing and approving the SDLT return, as well as providing any funds for the tax payment, and providing any information requested as early as possible. This added time pressure will require you to alter how you deal with SDLT formalities, especially during leaves of absence, to ensure you do not find yourselves subject to a fine. We would therefore recommend that approval of SDLT forms are dealt with as part of the acquisition process, rather than something done post completion.

This article was co-authored by Rachael Wilding, Legal Assistant, Manchester.