(For information. Full guidance will be available following Royal Assent).
The following Q&A covers the commonly asked questions about this measure, which is at clause 81 of the Finance Bill. More information is in Budget Note 44.
What is 'Rent to Homebuy'?
This term describes a scheme under which a housing association grants an Assured
Shorthold Tenancy to a potential purchaser at a subsidised rent, with a view
to granting a shared ownership lease in the future. This allows the prospective
purchaser to occupy the property while saving for a deposit.
What are the Stamp Duty Land Tax issues with these schemes?
The amount of rent involved will generally mean that there is no Stamp Duty
Land Tax to pay on the Assured Shorthold Tenancy (AST) and the AST does not
have to be notified in a land transaction return. But potentially Stamp Duty
Land Tax may become payable on the AST later, when the shared ownership lease
is granted, because they are 'linked transactions'.
There may possibly be another land transaction involved in the scheme, such as the grant of an option, to which the same considerations apply.
In some cases the purchaser may enter into a contract for the grant of a shared ownership lease but be occupying the property under the AST before the lease is granted. In this case, the contract will be 'substantially performed' and Stamp Duty Land Tax will be due on the shared ownership lease when the purchaser takes up occupation: that is, before it is actually granted.
What do the new Stamp Duty Land Tax rules do?
The new rules disapply the linked transactions rules for these schemes and
prevent occupation of the premises under the AST triggering 'substantial performance'
of an agreement for a shared ownership lease. This ensures that the purchaser
will only have to pay Stamp Duty Land Tax when the shared ownership lease
is actually granted, and then only on the shared ownership lease itself.
What about shared ownership trusts?
The new rules will apply to a 'Rent to Homebuy' scheme under which a shared
ownership trust is declared, as they do to a scheme under which a shared ownership
lease is granted.
Will this make any difference in practice?
In many cases the new rules will make no difference to the amount of tax a
purchaser has to pay (which for the majority of shared ownership purchases
will be nil). The purpose of the measure is to give purchasers under these
schemes certainty that they will not face unanticipated Stamp Duty Land Tax
liabilities at a time when they may be financially stretched.
When do the new rules take effect?
The new rules apply where a shared ownership lease is granted (or a shared
ownership trust is declared) under a 'Rent to Homebuy' scheme on or after
Budget Day, 22 April 2009.
