As plans for a 3% stamp duty surcharge for second home purchases and for buy-to-let landlords, due to come into effect in April, CIOT is lobbying the government to bring in an exemption for parents helping their children become first time buyers, highlighting that the current proposals present particular challenges for families where a child has additional needs
The institute’s comments come in its response to the consultation on plans to charge an extra 3% stamp duty land tax (SDLT) on people’s purchase of additional residential properties worth more than £40,000, from 1 April 2016.
It says that although the policy aim is to charge these higher rates of SDLT on second homes and buy-to-lets, the changes are so wide that they will potentially catch children whose parents buy jointly with them to help them onto the housing ladder – among the very people whom the government is hoping to benefit.
CIOT also highlights circumstances where a parent of a child, who is now 18, and who has special or particular needs, purchases a flat jointly with their child, to enable him/her to enter supported but independent living. The parents own and retain their own home. The planned higher rate will apply to the entire consideration for the purchase even though the child has one home and the provision of the accommodation has reduced the need for state assistance.
In the case of joint buyers, if any of them owns another property and is not replacing their main residence, 3% applies to the entire price. This has led the CIOT to ask the government for a carve out for joint buyers where the house will be genuinely used as a main residence of someone who does not already have one (as long as they are joint owners).
Brian Slater, chair of the CIOT’s property taxes sub-committee, said: ‘A joint purchase may be made for reasons that have a clear social value and not a bid to set up a buy-to-let business. Life is complex and there are many situations where parents want to support their adult children in buying a home.
‘Taking even a small interest (while owning another property) means that the extra 3% is payable on the whole of the purchase price. This will substantially increase the SDLT bill, but there are cases - like supported living – where it is absolutely right for parents to have an equity interest.’
CIOT is also concerned that the new system will mean that all sorts of value judgments have to be made about how the property will be used, making the conveyancing process increasingly complicated.
The Treasury consultation on higher rates of stamp duty on purchases of additional residential properties closed on 1 February.
CIOT’s response to the consultation is available here
