HMRC SDLT: SDLTM29890 – Interaction with Shared ownership – Staircasing transactions

Principles and Concepts of Staircasing Transactions

This section of the HMRC internal manual provides guidance on staircasing transactions within shared ownership schemes. It outlines the tax implications and procedures involved when a shared ownership property owner purchases additional shares in their property.

• Explanation of shared ownership and staircasing.
• Details on tax responsibilities during staircasing.
• Guidance on calculating tax liabilities.
• Procedures for reporting transactions to HMRC.
• Examples illustrating common scenarios and calculations.

Understanding Staircasing Transactions and Shared Ownership

Introduction to Staircasing

Staircasing refers to the process where a person who has purchased a share in a property increases their ownership by buying additional shares. This is commonly associated with shared ownership schemes, where a buyer can acquire a portion of a property and gradually increase their stake over time.

The First-Time Buyer Relief

First-time buyers are typically eligible for certain relief regarding Stamp Duty Land Tax (SDLT) when they purchase their first home. However, it is important to note that this relief does not apply when the buyer engages in staircasing after initially acquiring their lease.

– Key Point: If you are a first-time buyer and have claimed relief when you first bought your lease, you will not lose this relief when you later purchase more shares in the property through staircasing.

Impact of Total Transaction Values

Even if the total amount you have paid for all transactions—initial purchase and subsequent staircasing—exceeds £625,000, you will not have your first-time buyer relief withdrawn.

– Example: If a first-time buyer initially purchases a 40% share of a property for £240,000 and later stairs up to 100% ownership by purchasing the remaining shares for £440,000, their total transaction cost is now £680,000. Despite this, the buyer retains the relief from their first purchase.

Market Value Elections

When it comes to calculating SDLT for further purchases, the rules can vary based on whether an election for market value is made.

– Market Value Election: If a buyer does not make a market value election, they will not incur further SDLT costs until they increase their ownership share to over 80%.

For any purchases that push their ownership share over the 80% mark, standard SDLT rates and calculation methods will apply.

Normal Rules for Shared Ownership

Once your ownership share exceeds 80%, the transaction is subject to regular SDLT rules, which include:

– Standard Residential Rates: These are the standard rates that apply to residential property purchases.

– Calculation Method: You will calculate SDLT based on the purchase price of the shares acquired in the staircasing transaction.

– Example: If a person who owns 80% of a property decides to buy an additional 20% share for £100,000, they will calculate SDLT on this £100,000 purchase, applying the relevant residential rates.

Subsequent Staircasing Transactions

After your ownership exceeds 80%, if you continue to staircase, each of these transactions will also be subject to SDLT according to the normal calculations.

– Example of Subsequent Transaction: Following the previous example, if the same owner later decides to buy an additional share worth £50,000, SDLT will again be calculated based on this amount at the standard residential rate.

Key Takeaways for Buyers Participating in Staircasing

– First-time buyer relief remains intact through staircasing, regardless of total purchase amounts over £625,000.
– No further SDLT is payable until ownership surpasses the 80% threshold if no market value election is made.
– Regular SDLT rates and calculations apply to any transaction that increases ownership beyond 80%.
– Each subsequent staircasing transaction after reaching over 80% will attract SDLT based on the purchase price.

Final Remarks

Staircasing can be a great way for individuals to gradually increase their property ownership in a manner that suits their financial situation. By maintaining awareness of the SDLT implications at each phase, buyers can make informed decisions during their staircasing process.

For more specific guidelines or unique cases, it is advisable to consult the full HMRC guidance or speak to a tax professional.

You can view further details on related transactions and their implications at SDLTM29890 – Interaction with Shared Ownership – Staircasing Transactions.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM29890 – Interaction with Shared ownership – Staircasing transactions

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