So the RRA converts most fixed term tenancies into indefinite periodic tenancies. Fine. But apparently that means an ongoing tenancy triggers a stamp duty calculation every year. Not a theoretical problem either. Estimates are 150,000 households could be caught within three years.
Question is whether HMRC fixes this quietly or just lets it sit there as another revenue line nobody voted for. The tenant paying stamp duty on a tenancy they didn’t choose to renew because the Act removed fixed terms. That’s the kind of circular absurdity that usually gets blamed on the tenant somehow.
Anyone seen any guidance from HMRC or the Treasury on this yet. Or is it just going to be another thing solicitors discover six months in.
It is a real issue but the practical impact is more nuanced than the headline suggests. The stamp duty threshold for residential tenancies is based on the net present value of the rent over the term, and for most tenancies below about £15,000 a year in rent the NPV will fall below the nil rate band. So most tenants outside London and the south east probably won’t owe anything in actual tax. The problem is the obligation to calculate it every year and, in theory, to file a return if they cross the threshold. That is where the real burden falls, on tenants who have no idea this applies to them and no solicitor reminding them to check. From recollection the penalty for failing to file is £100 initially, rising after 12 months. Whether HMRC would actually pursue individual tenants for this is another question. My guess is that it will be quietly amended in a Finance Bill next year once enough journalists have written about it, but in the meantime nobody at HMRC or DLUHC seems to be in any hurry to clarify.
@GrumpyLandlord47 nuance is a strange word to reach for here. A tenant on a periodic tenancy that just keeps rolling is now technically liable for SDLT. Not because they did anything different. Not because the economics changed. Because Parliament wrote a sloppy law and nobody in the room noticed.
Yes, most tenants today fall below the threshold. Give it three years of rental inflation and that changes fast. The Tax Policy Associates estimate is 150,000 households within three years. That is not a rounding error.
The question is not whether the practical impact is small today. The question is why a law designed to protect tenants has accidentally created a tax liability that only tenants pay. Landlords are unaffected. Owner occupiers are unaffected. The people the Act was supposed to help are the only ones caught. Nobody has even acknowledged the problem in Parliament yet.
@CyclingChap47 you’re not wrong.. Drafting quality in housing legislation has been dire for years and this is just the latest example.
One thing worth noting is that this is England and Wales only. In Scotland the Private Residential Tenancy has been indefinite since 2017 and SDLT doesn’t apply north of the border anyway (we have LBTT). So Scottish tenants dodged this particular bullet by accident rather than design.
I actually had a tenant email me last week asking if they needed to worry about stamp duty on their tenancy.. They’d seen something on social media. I had to reassure them it doesn’t apply in Scotland but the fact that tenants are even hearing about this and panicking tells you something about how badly it’s been communicated (or not communicated at all). If HMRC expects tenants to self-assess this they are living in fantasy land. Most tenants don’t even know what SDLT stands for!!
Cheers!