Budget: Property exchanges no longer 'linked'

Exchanges of property between connected persons will no longer be treated as linked transactions in determining the rate of stamp duty land tax, the Budget notes have revealed.

The government has announced it will introduce legislation in the Finance Bill to amend the stamp duty land tax (SDLT) treatment of exchanges of property so where an exchange takes place between “connected persons” the two legs will not be treated as “linked” with each other for determining the rate of SDLT.

This is likely to affect individuals who exchange property, especially those who are married or related to eachother.

At present, the two legs are linked and this means the market values are aggregated and the rate of SDLT is that applicable to the aggregate.

For example, if a property worth £300,000 is exchanged for property worth £220,000 the rate of SDLT on both legs is 4%, the rate applicable to £520,000.

Under the new rules, there will be a charge at 1% on the acquisition of the property worth £220,000 and a charge at 3% on the acquisition of the property worth £300,000.

In addition, the government has announced it will extend the same tax benefits for SDLT which are currently available for shared ownership leases to shared ownership trusts.

The tax relief for shared ownership leases means if a property is purchased by instalments, only the first and last instalments are normally chargeable to SDLT.

The Finance Bill will also include measures allowing HMRC to accept elections for pre-owned assets to be treated as part of an estate for IHT reasons which were made after the 31 January deadline.

Legislation will also be introduced to extend the current landlords energy saving allowance (LESA): floor insulation will be added to the energy saving items which qualify for the allowance; a deduction of up to £1,500 will be available for each property rather than for each building; and the allowance will be available until 2015.

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