Recent HMRC guidance has clarified the parameters of the SDLT relief for registered providers of social housing (RPs).
Relief applies:
- for non-profit RPs and profit-making RPs, where the transaction is funded with the assistance of a specified public subsidy; or
- for non-profit RPs, where the vendor is a "qualifying body" (broadly, a non-profit RP or local authority).
The new guidance confirms some welcome interpretations as to how the relief operates so that more purchases should be exempt from SDLT.
As this is not a change in law, HMRC has not restricted the new guidance to future transactions. RPs (including local authority RPs) should therefore seek to identity land purchases on which SDLT was paid but which could fall within the revised guidance. As there is a time limit for claiming refunds of overpaid SDLT, the sooner the better.
The main clarifications are:
Local authorities
In our experience, a local authority RP was seen as belonging to a third category of RPs (neither a non-profit RP nor a profit-making RP) and therefore unable to access the above reliefs. The new guidance recognises a local authority RP as a non-profit RP and therefore able to claim relief on purchases which use qualifying subsidy and on purchases from a local authority or non-profit RP.
This is fertile ground for refunds as many local authorities could have paid SDLT when relief was actually available.
Expected public subsidy
Under the first limb, the land purchase must be funded with the assistance of a public subsidy.
RPs might have been hesitant to claim the relief where the price was paid from their own funds because the subsidy had not been approved or drawn down. HMRC guidance confirms that relief can be claimed where the RP has a reasonable expectation that the subsidy will be made available to them. It will be important to go on and obtain the subsidy and to be able to demonstrate that it was allocated to the relevant land purchase in the records of the RP.
RPs may have (now justifiably) taken a bullish view on this point in the past and claimed relief. However, even those RPs should consider whether refunds could be claimed – most likely based on the reasonable expectation point. We think that there will be some who did not have any approval for grant funding, and paid SDLT, but looking back could say that at the time of purchase they expected to successfully apply for grant.
Transferred subsidy
The guidance confirms that relief may be available where subsidy is assumed by the buyer although this is a relatively complex area. HMRC expect other conditions to be met and say that it is fact dependent.
Whether this will yield refunds is more difficult to say and we think it will mainly turn on how the contract was drafted. With sufficient care it should be possible for future purchases to fall within the terms of the new guidance.
