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  • Tax

    Annual enveloping stamp duty land tax

    I've just had an offer accepted on a flat, and got quotes from 3 solicitors to handle the purchase. 1 of the solicitors noted:

    "You should be aware that unless your company manages the property itself rather than putting it with agents, once the flat becomes worth £500,000 or more it will be liable for annual enveloping stamp duty land tax"

    This is not something that I have heard of before. Anyone else know anything about this?

    I could ask the solicitor who mentioned this, but I am not using their services so feel bad for asking.

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    That was a scary 5 minutes thanks for that. haha

    I didn't know anything about this hence the fear, however having looked at this I found reference to paragraph 5 of the rules there is relief for "Businesses of letting, trading in or redeveloping properties"

    An interesting resource I found is here https://www.taxation.co.uk/Articles/2014...ot-so-high

    I appreciate that there may be a view that putting it with a letting agent is taking the owner away form the business of letting but I am not convinced that having an agent would do this in tax law but I am no tax expert,

    That being said I cannot find the same relief on .gov so I have been unable to look into the detail if someone else can find more info they might want to chip in.

    My guess is that this was introduced because wealthy overseas buyers sit on property for investment purposes and it is designed to either discourage them or profit from their activities. With that in mind I doubt very much they want to add to the burdens of landlords providing housing for the general public, that said once again, I may be wrong.

    I have just spoken to my accountant upstairs and she said that HMRC define a property rental business as "owning three or more properties". So whilst the solicitor may suggest that if you don't manage you are not a property rental business HMRC might not agree with him/her. It's all semantics!

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    Landlord with 25 years’ experience in the property market and a specialist in tenant referencing ID and credit screening. Creator of identity, credit and anti-money laundering system ValidID.co.uk

    Hi Chris

    Thanks for taking the time to reply. I have fired of an email to my accountant and will see what he comes back with.

    As I have more than 3 properties in the company already, I guess I am deemed to be a professional by HMRC, but the overriding factor here (for now at least) is that I self manage. It was just a shock when I saw it from the solicitor as I had never heard of it before, and I already own a flat worth over £500k in the company for a number of years now

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    As I said I am no expert but it does look as though you are okay. But I would still get the accountant to confirm, when you do please post back so we all know for sure.

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    Landlord with 25 years’ experience in the property market and a specialist in tenant referencing ID and credit screening. Creator of identity, credit and anti-money laundering system ValidID.co.uk

    Hi Chris

    My accountant has never heard of this tax either. I don't mind that he doesn't know, but he doesn't appear to have made any effort to find out and let me know if I am affected!

    Not the answer I was looking for, but it may mean that I should look for a specialised property accountant!

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    On .gov ATED is descrived here.

    You would probably have to make a return about it, but can claim this relief:

    • let to a third party on a commercial basis and isn’t, at any time, occupied (or available for occupation) by anyone connected with the owner

    Using an agent actually helps qualify for the relief.

    the following may suggest that a property rental business is not
    carried on on a commercial basis:
    • the property is never marketed to the public through an independent
      agent

    • the property is not managed by an independent agent (where the landlord
      does not have sufficient resources to undertake effective management of
      its properties directly)


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    In the situation that I think you are describing, I think the solicitor is wholly wrong and you should discount that firm from completing the conveyancing, even if they offer to do it for £1

    There is no tax with that (convoluted) name and, even if one assumes it refers to ATED, there is no liability for a property let on a commercial basis to third party tenants

    edited to make clearer

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    I'm actually letting the flat on a residential basis to tenants,however when quoting for their conveyancing fees the solicitor did not know who I intended to let my flat to.

    I've never seen such a tax before, and none of the other solicitors mentioned it to me, hence my confusion in the 1st instance.

    I am still waiting on my accountant to get back to me (i'm sure he will in due course) and I will update this thread once he has done so

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    Are you buying the flat, or is a company buying it?

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    Buying the flat thru a Ltd Co, with the intention of residential letting on a AST, being self managed by myself

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    Then I stick with my original post on the matter

    As long as you aren't letting to a "family member" as described in the context of ATED, then it will be exempt under current legislation

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