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As the 31 March 2021 looms high over the horizon, legacy officers are understandably grappling with how to plan their legacy property sales and the million-dollar question of whether an extension to the Stamp Duty Land Tax ('SDLT') holiday will be agreed.
The SDLT holiday moved the threshold at which buyers must start paying SDLT from £125,000 to £500,000 as well as reducing the SDLT rate to 3% for purchases of additional dwellings and introducing tapered charges for any amount above the half million level.
The aim of the SDLT holiday was to increase the volume of residential sales. This seems largely to have been successful, although some might query if the surge in sales was equally fuelled by the rush for houses in green surrounds and with separate space for working!
However, as the 31 March deadline approaches, the worry is that where transactions are unable to get across the line before the window closes, buyers will seek to renegotiate purchase prices by the amount of SDLT they are then required to pay. Many legacy officers feel torn at present between delaying sales to resolve title issues or take planning advice and pressing ahead to avoid such bartering.
Einar Roberts of Cluttons observed that:
"The SDLT holiday was designed as a short-term measure and government will clearly be balancing the long-term tax revenue shortfall against the shorter-term risks to the housing market and wider economy.
What do the ONS statistics say about the impact?
The Government will therefore be acutely aware that the housing market has been a rare bright spot in the economy since the holiday was introduced in July last year with associated support for consumer spending and, more importantly, confidence. It seems likely that when the 31 March deadline for the SDLT holiday was set, the more draconian measures needed to contain the virus would have been expected to be well behind us, with the economy rebounding in consequence. This is clearly not the case today and government will need to be sensitive to ending this important support in a highly uncertain market.
Subjectively, unless there is proof that the economy is sustainably moving out of the recently enforced downturn, the risks of failing to extend the holiday far outweigh the benefits. However, we should be alive to the fact that if the Government does extend the holiday it is likely to be closer to the deadline, perhaps around the end of February/ beginning of March. This is because it will not wish to create a temporary slowdown by extending ahead of time. Rather, Ministers will hope to create a second wave of impetus from opening a further window after most of the current transactions that can get over the line in time, are over the line.
Legacy officers looking to get on the front foot, will doubtless seek to gain an understanding of the dependence on the holiday for the individual transactions they are processing (more difficult when a chain is involved), which should help their Charities with shorter-term financial modelling."
Anna Phillips of Foot Anstey LLP commented that:
"It is worth keeping in mind that the costs of appropriate steps to increase the value of properties, always need to be weighed careful against the increased purchase price such measures will achieve. It is a calming thought then, that the sort of renegotiations which might be seen from buyers missing the 31 March deadline (a renegotiation of £15,000 for example on a £500,000 property) is probably a smaller sum than you would want to be aiming to achieve from any actions aimed at adding value. As such, legacy officers and their advisors can simply weigh any possible 'SDLT triggered' renegotiation in the mix together with their normal cost / benefit analysis rather than it needing to create any additional cause for sleepless nights!"
CEO of Foot Anstey's Conveyancing Services team, Rebecca Kibby observed that there are a number of driving factors for extending the SDLT concession, which include the impact on the market but also the impact of those transactions currently in progress and where conveyancers are working very hard to ensure that their client's do not lose out because of the delays faced right across the industry due to the pandemic. Many conveyancers actually take the view that it may be better not to extend the SDLT holiday. Rather, "if the proposed extension is to create further market stimulus, it might better to let matters play out naturally rather than creating the uncertainty which might be caused by repeated extensions, as it is otherwise difficult to predict what will happen beyond the 1st April 2021".
Rebecca also points out that conveyancers are accustomed to SDLT changes brought about by economic change and that delaying the deadline to a point in the future will mean that the same challenges for home movers and conveyancers will be faced at a later time; unless any extension was to only benefit those transactions already agreed in principle at the time of the extension in recognition of the challenges faced by the present situation.
As ever though, the key for legacy officer is to keep an open dialogue with their supporting professionals so that an overall strategy can be achieved that best maximises value.
BREAKING NEWS: Following initial drafting of this article the question of an extension to the SDLT was debated in parliament this week. MPs considered many of the aspects discussed above and it seems likely that an extension may well be enacted but on a tapered basis so as to assist those buyers already well advance or with mortgage offers in February 2021. With luck, this should avoid the cliff edge and subsequent renegotiation which Legacy Officers have feared!
Anna Phillips, Legal Director Foot Anstey LLP and Einar Roberts, Partner, Cluttons LLP
