Jo Morgan, Partner in Coodes Solicitors’ Residential Property team, comments on delays to proposed changes to the Government’s new 3% stamp duty surcharge for properties with an annexe. Jo warns that, post-Brexit, homeowners and potential buyers will now need to wait for a firm decision on the potential change to the regulations and whether or not anyone can claim a refund.
“Following the introduction of the 3% stamp duty surcharge on second properties we had a number of questions about the implications for properties with an attached ‘granny flat’ or holiday home. When the changes came in on 1st April, it came to light that buyers of property with more than one unit would be treated as second home buyers and would need to pay the higher tax.
“With a number of rural properties in Cornwall having an annexe, such as a converted outbuilding that can be used for holiday lets, we have been concerned about how this will affect some of our clients.
“Some weeks back, the Treasury announced plans to change the rules so that the higher rate of stamp duty will only be applied if the additional home is worth at least a third of the total price being paid, is valued at £40,000 or over and could be sold as a separate residence. That would mean that for the majority of properties with an annex, buyers would pay the standard stamp duty rather than face the higher charge. However, where a home with an annex or cottage does qualify for the Stamp Duty surcharge, the higher rate would apply to the value of the whole property, not just the annex.
“Following the result of the EU referendum, the Government has announced that it is delaying the decision to amend the regulations until a new Prime Minister is in post. The Government also said that it will offer refunds backdated to the 1st April, but again has put this decision on hold until a new Prime Minister is elected.
“So, if the Government does go ahead with the change, what does it mean? If, for example, the main property is worth £250,000 and a separate building is worth £50,000, there would no extra stamp duty to pay, because the total value is £300,000 and the annexe is worth less than a third of this. However, if the annexe is worth more than a third of the main property – for instance, the main property is worth £250,000 and the separate ‘granny flat’ is also worth £250,000, then the buyer would pay the extra 3% stamp duty on the value of the whole transaction – that is, £500,000.
“At Coodes we are keeping abreast of the changing legislation so we can offer you the most up to date advice.”
For further advice and assistance on buying or selling a property, contact Jo Morgan at Coodes by emailing Jo.Morgan@coodes.co.uk or calling 01726 874727.