The Deputy Prime Minister, SDLT and a tale of woe

Double trouble

Angela Rayner’s trouble with stamp duty land tax (SDLT) isn’t the first time she’s had issues involving her property dealings. However, this time it proved fatal to her role as Deputy PM after she admitted not paying the correct amount of SDLT. Her downfall wasn’t so much about tricky tax rules, many innocent people fall foul of these, but that she ought to have taken steps to ensure she complied with them.

SDLT recap

Before we dig into the finer points that caused the Deputy PM so much trouble, we’ll remind you of the general SDLT rules. SDLT only applies to property purchased in England and Northern Ireland; Scotland and Wales have their own versions. The tax applies to residential and commercial properties but at different rates. If you already own a residential property and you buy another before you sell the first property, the SDLT higher rate applies to the purchase of the second property. The higher rate is 5% more than the normal SDLT rate. This applies even if the first property is your home and you move from it into the newly acquired property and sell the first later. The extra SDLT can be reclaimed if you sell or transfer ownership of the first property within three years of buying the second.

Three homes or two?

The initial media reports claimed that Ms Rayner had three homes. This was misleading. For a property to count as yours for SDLT purposes you must have a financial stake in it, e.g. a share in the freehold, a long leasehold, etc. For example, if you live in rented accommodation where the lease is renewed annually and don’t have any other residential properties, the higher SDLT rate won’t apply if you buy a residential property. Ms Rayner’s home in London is owned and provided to her by the State, and she has no financial stake in it.

What went wrong?

Although the London property wasn’t a factor for SDLT, Ms Rayner had owned another property in Ashton-under-Lyne. She had transferred her financial stake in that property to a trust set up for her disabled son. Seemingly, at the time she bought her new home in Hove she didn’t have a stake in any other residential property, and so the higher rate of SDLT wouldn’t apply. But here’s the catch; because of the type of trust and that it was for the benefit of her son who is a minor, the tax rules deem her to still have a stake in the property for SDLT purposes. Therefore, the higher SDLT rate did apply to the Hove purchase.

Lessons for all

It seems that Ms Rayner relied on casual tax advice rather than consulting an expert when clearly her circumstances weren’t straighforward. This led her to provide incorrect information to the solicitors who handled the purchase. No doubt they sent her the usual forms on which we assume she must have indicated that she had no stake in any other residential property. The firm calculated the SDLT on that basis. When asking an advisor to prepare any tax forms provide as much information as you think they might reasonably require. It’s better to have your advisors tell you that the information isn’t needed than for them to report incorrect information to HMRC.