Read the original guidance here:
HMRC SDLT: Guidance on Stamp Duty Land Tax for Right to Buy Transactions

SDLTM27015 – Reliefs: Right to Buy Transactions, Shared Ownership Leases etc

The Right to Buy scheme is a government initiative that allows tenants of public sector housing to purchase their homes after living there for a certain period of time. This policy is overseen by the Office of the Deputy Prime Minister, and it provides an opportunity for tenants to become homeowners. The following guidance explains how the Stamp Duty Land Tax (SDLT) applies to these transactions, including key considerations and requirements.

Key Factors Affecting Stamp Duty Land Tax

When considering a Right to Buy transaction, there are two main points to keep in mind, both of which impact how SDLT is calculated:

• The Maximum Discount: This discount allows eligible tenants to buy their property at a reduced price. The discount amount is essential because it determines the final purchase price, which is used to work out the SDLT due.
• The Period of Discount Repayment: If a tenant sells the property within a specific timeframe, currently set at five years, they are required to repay a portion of the discount to the original housing authority. This repayment only applies if the property is sold within this period.

Understanding the Legislation

The legislation from FA03/SCH9/PARA1 aims to ensure SDLT is calculated based on the actual price paid by the buyer rather than the property’s market value. This means:

• The amount a buyer pays for a Right to Buy property is what counts for SDLT calculations, not what the property might be worth in the current market.
• Furthermore, FA03/SCH9 overrides FA03/S51, which ensures that SDLT does not apply to any potential repayments due to the period of discount repayment.

Eligibility for SDLT Relief

For transactions involving discounts from public bodies listed in FA03/SCH9, properties may qualify for SDLT relief. However, this relief is specifically related to any potential repayments applicable to the original vendor. It is essential for buyers to understand that while they may receive relief, they are still responsible for accurately reporting their purchase price when making the SDLT payment.

Preserved Right to Buy

In certain circumstances, a tenant may retain a Preserved Right to Buy as defined by the Office of the Deputy Prime Minister. The SDLT treatment for these transactions is the same as those under standard Right to Buy provisions. This ensures consistency in how these acquisitions are treated for tax purposes.

Filling Out the SDLT Form

When a buyer completes the SDLT1 form to report their transaction, it is vital to use the correct codes and provide the necessary information:

• The code for Right to Buy relief is 22. This should be entered where required on the form.
• For question 10, which covers freeholds or assigned leases, and for new leases, the actual purchase price paid by the buyer should be entered. This includes using code 22 and/or 23 as appropriate.
• The tax amount based on this purchase price should be recorded in box 14 of the form.
• Importantly, the market value of the property should not be mentioned anywhere on the form.

This process is designed to ensure transparency and accuracy in reporting the details of the property transaction for tax purposes, aligning with the government’s regulations.

Additional Considerations

It is essential for tenants engaging in the Right to Buy process to remain aware of potential implications should they decide to resell their properties. The repayment of the discount can affect the overall finances related to the sale, making it crucial for buyers to plan accordingly.

Before proceeding, it might be beneficial to seek advice from professionals experienced in property law or taxation to ensure that all details of the transaction are understood and complied with correctly.

Resources for Further Information

For more information on the Right to Buy scheme and the related legal framework, tenants can visit the website of the Office of the Deputy Prime Minister. This site provides comprehensive details regarding eligibility, procedures, and other important aspects of the Right to Buy policy.

It is also advisable for buyers to consult the relevant sections of the legislation and guidance on SDLT to understand better the reliefs available and the correct way to file their forms.