It seems like a simple idea - get the seller to pay SDLT rather than the buyer. The aim is to help buyers, especially those at the lower end of the market, buy into the property market - but what will it really mean?
I will leave it to others to consider matters such as the practicalities of the buyer's ability to register the purchase depending on the seller having paid the tax (and not simply disappeared abroad with the money) or the question, where there is negative equity in the property, whether HMRC gets its money ahead of the lender. Instead, I will simply look at the financial consequences.
As far as I see it, there are two main models on pricing for houses. Either the seller sells at a price that gives the seller the amount they want after all costs have been paid - or the buyer pays as much as the buyer wants, or is able to afford.
Looking first from the seller's perspective - take a seller, currently selling a property where they want to retain £500,000:
- If the seller has to pay the SDLT on the sale, they will calculate the SDLT on a property sold for £500,000 at £15,000. Therefore they will charge £515,000 and possibly be happy.
- The SDLT on a property sold for £515,000 will actually be £15,750 – increasing the SDLT cost by £750 and leaving the seller with only £499,250!
- The seller may well not notice the extra cost when it is hidden by all the other costs of sale and moving.
- If the seller is clued up enough to work this out, in order to end up with £500,000, they will have to increase the price to £515,789 to leave £500,000 after SDLT – increasing the SDLT payable by another £39.
Looking at it the other way around, from the buyer's perspective - take a buyer who has a budget of £515,000 (including SDLT) to spend on a property:
- Currently, the buyer would pay £500,000 to the seller and £15,000 to HMRC.
- If the seller pays the SDLT, when the buyer pays £515,000 (the maximum that the buyer can afford), the money will go £499,250 to the seller and £15,750 to HMRC.
Whichever approach is taken, either the buyer or the seller loses out - or they end up splitting the cost between them. The only one that wins is HMRC who take more tax either way - effectively, the SDLT rate has been increased. A measure supposedly intended to help buyers buy into the market will have had the reverse effect by increasing the costs of purchase.