Land Transaction Tax: Wales' new Stamp Duty

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Updated:

28/03/2018

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Wales' Land Transaction Tax (LTT) is set to replace Stamp Duty Land Tax from April 2018. Stamp Duty Land Tax (SDLT) is the tax you have to pay when you buy or lease building or land which exceeds a certain price.

Just looking for a Welsh Land Transaction Tax (formerly Stamp Duty) Calculator?

Then click to use our handy Stamp Duty Calculator for Wales.

There is no first time buyer relief for first time buyers buying property within Wales.

The Welsh Revenue Authority (WRA), formally established in October 2017 is set to take over the role of HMRC in running and collecting the tax. This is part of various moves to devolve the collection of all taxes in Wales to Welsh authorities.

In most ways the LTT is set to work in more or less the same fashion as SDLT but, according to the Welsh Government website, the following aspects affecting residential buyers and sellers of property are to be changed:

Rates and bands - NB Updated in March 2018 - see diagram below for a clear picture
Rent element of new residential leases
Rules that apply a 15% slab rate
Measures to tackle devolved tax avoidance

We examine each of these below and other matters of interest such as how the LTT will treat buying property which is on both sides of the English/Welsh border.

Click if you're looking for conveyancing solicitors experienced in Welsh property.

Click if you're just looking for a stamp duty calculator.

1 Rates and bands

The Welsh Government has instituted different rates and bands from the English Stamp Duty Land Tax (SDLT).

Wales-LTTax-Rates-for-Residential-and-Additional-Homes-from-April-2018.png

Note that the LTT rates for additional homes add 3% to each residential band; for comparison to England, please click on second home SDLT surcharge.

2 Rent element of new residential leases

Under the current SDLT rules in England and Wales, if you purchase a new residential lease, you have to pay a portion of stamp duty based on your rent as well as based on the sale price of the property.

This is discussed in this article on stamp duty (click and go to the Net Present Value of Rent section).

The WRA has decided to remove this element in the coming LTT; something which is likely to be welcomed by first time buyers in particular.

3 Rules that apply a 15% slab rate – repealed

Pre-existing stamp duty rules impose a 15% slab tax surcharge when 'non-natural' persons, i.e. companies or collective investment schemes, acquire property exceeding a value of £500,000.

The WRA has dropped these from the LTT, something which may please some sections of the Buy to Let market, for example.

4 Measures to tackle devolved tax avoidance

a) New General Anti-avoidance Rule (GAAR)

According to the Welsh Government, the GAAR:

"… will enable WRA to recover any devolved tax that has been avoided as a result of an ‘artificial’ tax avoidance arrangement."

The Welsh GAAR is set to have a wider remit than the current UK GAAR, which only applies to 'abusive' tax arrangements and requires the establishment of an Advisory Panel.

b) Targeted Anti-avoidance Rules (TAARs)

The TAARs are set to disallow relief being claimed where a transaction forms part of tax avoidance arrangements.

Unlike the SDLT, which includes specific rules targeting aspects of particular reliefs, the TAARs will introduce a new regime applicable to all reliefs.

In sum, if your conveyancing involves a Welsh property, you should be particularly wary about taking actions or using schemes which could be classed as tax avoidance! The new regime is set to have increased powers and coverage where tax avoidance is concerned.

Border Issues

We asked a Welsh Government spokesman about how the LTA is set to treat buying property that is on both sides of the English/Welsh border, known as 'cross-title transactions'.

Briefly he said that these transactions would have to satisfy both HMRC's and the WAR's rules:

"The acquisition of a property that is on both sides of the border (a ‘cross-title’ transaction) will need to be comply with both LTT and SDLT legislation and be treated as two separate transactions; one in Wales and one in England. The consideration given for the transaction will need to be split between the two transactions on a just and reasonable basis. If both transactions are notifiable then two returns will need to be sent; a LTT return to the WRA, and a SDLT return to HMRC."

Regarding how this applies to a person buying two properties, one wholly in Wales and one wholly in England, as part of a single deal, he said:

"The same will be true where two properties are acquired as part of a single deal, one wholly in Wales and one wholly in England (or elsewhere), with the consideration needing to be split between the Welsh and the other transaction on a just and reasonable basis. Again, if the transaction in Wales is notifiable then a return must be sent to the WRA."

Click to find out more information about the Land Transaction Tax Wales new Stamp Duty.