In last week's budget, the chancellor, Philip Hammond, announced that from 1 March 2019, stamp duty land tax (SDLT) returns will need to be filed, and any duty paid, within 14 days.
This reduces the time for making payment by more than half. If the timeframe is not complied with, purchasers risk fines for late payment.
Why has the government taken this decision?
Earlier this year, the government published a summary of responses to the 2016 consultation on changes to the filing and payment process for SDLT.
Despite the widespread concerns about the proposed reduction to the SDLT filing and payment window from 30 days to 14 days, the government has decided to press ahead with this change.
What are the concerns in reducing the payment window?
Although the submission of an SDLT return, and payment of any tax, is simple in straightforward transactions, such as the purchase of a residential property, this is the not case in many commercial property matters.
Deferred payment of SDLT
An example of a more complex, but fairly common, situation is where the purchaser is applying to defer payment of the SDLT. Purchasers are entitled to do this where the consideration for the purchase is contingent or uncertain and falls to be paid at least six months after the effective date of the transaction (usually the completion date). This may be because, for example, the deal includes overage.
In such cases, the purchaser not only has to make its application to defer payment within the specified timeframe but also has to have obtained HMRC's approval to the deferment. If the filing and payment window is reduced, how will purchasers complete the SDLT return in situations where deferment has been requested but no approval has been provided? In its response to the consultation, the government stated that:
"Regarding applications for deferment pending a decision from HMRC, the government does not consider that they present a barrier to a shorter filing timetable. In these circumstances, the customer should complete the return, calculating SDLT as usual on a self-assessment basis, taking into account any amount they believe should be deferred. In answering the question: 'Have you agreed with HMRC that you will pay on a deferred basis?' the customer should answer 'no'. HMRC maintains a database of all deferment applications and has a target of processing these, within 28 days of receipt. If HMRC do not approve the application for deferment, the return must be amended within 12 months of the filing date."
This seems an entirely unsatisfactory approach. Given the target of processing applications within 28 days, a purchaser applying to defer payment of SDLT is not going to get a confirmation within 14 days. Does the purchaser then proceed on the basis that the deferment is agreed? If the application is not successful, will the purchaser be charged interest for late payment?
Philip Hammond stated that the government is planning improvements to the SDLT return that aim to make compliance with the new time limit easier. It remains to be seen whether this aim will be achieved.
Legislation will be introduced in the Finance Bill 2018-19. We await this with interest.