From 1 April 2018 HMRC will cease collecting stamp duty land tax (SDLT) for land transactions in Wales. From this date Welsh Government will collect a new Land Transaction Tax (LTT) via a body that has been set up called the Welsh Revenue Authority. This will be the first time in nearly 800 years that Wales has set its own tax!
Royal Assent for the new legislation was given on 24 April 2017. However, the fundamental question of “what will the new rates be” remains unanswered. We can expect the new rates to be confirmed in October 2017.
What the legislation does tell us though, is that very little will change from the procedure we’re used to with SDLT. LTT will continue to be charged on land transactions which involve a “chargeable interest” and there will still be exemptions. It will remain that returns will not be required for transactions with consideration of less than £40,000 or where there is a lease of 7 years or less, the premium is less than £40,000 and annual rent less than £1,000.
The effective date will still be on “substantial performance” and there will still be a 30 day deadline for filing your LTT return.
In addition, the reliefs available will remain broadly the same.
There are a few subtle differences however;
- Leases – there will be no LTT charged on the rental element of a residential lease. The Welsh Revenue Authority will look at the main subject matter to determine whether the lease should be treated as residential or non-residential.
- Tax avoidance – the Welsh Revenue Authority have adopted their own tax avoidance measures rather than adopting those used by the SDLT regime. There are two key rules the aims of which are to; remove all LTT relief where the transaction is part of a tax avoidance arrangement; and ensure that tax schemes with the purpose of avoiding LTT will be extremely difficult to apply.
The most interesting point when considering a Welsh only tax is where the border of Wales will lie and what will happen to those properties that straddle the border or those portfolios which have both English and Welsh components?
It is likely that for such properties, both an SDLT and an LTT return will need to be submitted. Whilst the WRA have indicated that a definitive boundary will be provided, it appears that it will be for the purchaser and their solicitor or conveyancer to determine which country the property falls in and to apportion any consideration on a just and reasonable basis between the two regimes.
For those with a foot in both camps, deciding which country you are in will now extend beyond deciding who to support on those all-important rugby international matches!