Rule change will impose tax on sales of land, homes and commercial buildings
The National Housing Federation is set to press the government to change tax rules after housing associations were hit by a second stamp duty blow.

Charitable housing associations face stamp duty land tax bills of hundreds of thousands of pounds if they sell land, homes or commercial buildings.

This week's Inland Revenue ruling follows its decision to charge the tax on plots that include homes for market sale (HT 27 February, page 14).

Previously, charitable housing associations, which make up three-quarters of the sector, did not have to pay stamp duty.

The new tax, which came into force last December, is levied as a percentage of the land price up to a maximum of 4%.

Now, charitable associations will be charged stamp duty on land where they build homes or commercial properties for outright sale, homes to sell to key workers through the Starter Home Initiative or when they sell homes to other associations.

They will have to pay the tax even if the homes sold are to be used for affordable housing or if the money raised from the sale is used to build more affordable homes.

However, charitable associations will be given stamp duty relief on sales if they grant shared-ownership leases, if they immediately lease back commercial units they have sold, if they lease homes to another charitable association for affordable housing and possibly if they lease homes to a non-charitable association and use the proceeds for affordable housing.

Bob Wilson, head of finance policy at the NHF, said the body was considering mounting a campaign to persuade the government to change the stamp duty rules.

Lynne Murray, partner at law firm Lewis Silkin, said: "If you buy from an RSL, the purchasing RSL gets exemption from stamp duty land tax so it seems bizarre that the selling RSL gets caught in the rules. The only bit of light seems to be where they buy land partly for social housing and partly for housing for sale. If you split it into two transactions, you'd only pay stamp duty on the housing for sale part."

Charlie Proddow, partner at law firm Devonshires, said: "Provided the transactions were completed before the introduction of [stamp duty land tax] on 1 December, they would be under the old stamp duty regime. But anything completed after that date would be caught unless they exchanged before last July."

Source

Housing Today