Has anyone else picked up on the stamp duty angle of the Renters Rights Act? Now that fixed term tenancies are abolished and everything becomes a periodic tenancy by default, any tenancy that continues beyond 12 months apparently triggers an annual stamp duty calculation under the SDLT regime. From what I can gather, HMRC treats the continuation of a periodic tenancy beyond each anniversary as a new grant for stamp duty purposes. In practice most tenancies at typical rental levels will fall below the threshold, but in London and parts of the south east where rents are above roughly £20k a year the tenant could technically owe stamp duty and not even know it. The estimates I have seen suggest around 150,000 households will be caught by this within three years. Is this actually being enforced or is it one of those things that sits on the statute book and nobody does anything about? From recollection there was something similar before the Act but the scale was much smaller because most tenants had a fixed term to point to. Interested to hear if any other landlords have flagged this to their tenants or whether we are all just pretending it does not exist.
This has been a technical liability for years on periodic tenancies and HMRC has never seriously pursued it at scale. Unless they build some kind of automated cross-referencing between deposit schemes and SDLT returns I cannot see how they would identify non-compliance. The threshold is £125k cumulative rent which most tenancies outside central London will not hit. It is a real issue on paper but a non-issue in practice for the vast majority.
@Emmeline_Buys you are right that HMRC has never chased it at scale.. but the Renters Rights Act changes the calculus a bit because NOW every single tenancy in England will be periodic by default!! Previously it was a niche issue affecting maybe 30% of tenancies that had rolled over. Going forward it is 100% of them. That is a very different enforcement proposition.
The other thing worth flagging is the interaction with the 3% surcharge for additional properties. If a landlord is deemed to have entered a new lease each year (because the periodic tenancy renews annually for SDLT purposes), does the surcharge apply afresh each time?? I genuinely do not know the answer to that one but it would be an absurd outcome if it did.
Would not surprise me if this ends up being quietly tidied up in secondary legislation before anyone notices.. but worth watching.
Cheers!
The stamp duty position on periodic tenancies is not new. SDLT has technically been chargeable on the grant of a lease where cumulative rent exceeds the nil rate threshold since 2003. What has changed is visibility, not liability. Under the old system most periodic tenancies arose by holding over after a fixed term, and HMRC treated the original SDLT return as covering the initial term with a recalculation obligation on the tenant if the tenancy continued beyond it. Almost nobody did it, and HMRC never pursued it at scale.
The Renters Rights Act does not alter the SDLT legislation itself. It removes fixed terms, so every new tenancy is periodic from day one, but the obligation to file and pay SDLT where applicable was already there. The practical question is enforcement, and on that front nothing in the RRA gives HMRC any new tools or data sharing powers that I can see.
Harrison is right that the liability is not technically new, and I should have been clearer about that in the original post. The change is one of scale rather than law. Under the old system you had a mix of fixed term ASTs and periodic tenancies arising from holding over. From recollection, most tenants on periodic tenancies were long stayers who had originally taken a six or twelve month fixed term, so the numbers were relatively modest. Under the RRA every single new tenancy from day one is periodic, which means the number of tenancies theoretically subject to a recalculation obligation goes from a subset to the entire PRS. Whether HMRC chooses to do anything with that is the open question, but the political pressure to find revenue is not exactly diminishing. I would not be surprised to see it surface in a future Budget consultation document as a tidy little revenue raiser, even if enforcement remains patchy.