A little-known tax loophole means some buy-to-let investors and buyers of second homes could be exempt from the higher rates of stamp duty that come into force on Friday.
The Budget appeared to leave the new stamp duty regime relatively unchanged and many landlords thought they had been given no respite from the tax rise.
But because of a little-known loophole, which first appeared in a consultation response published on March 16, some landlords and second-home owners might be exempt from the 3 percentage point stamp duty surcharge on second properties.
For existing property owners to be exempt, they must be buying a main residence rather than a second home or investment property and have previously owned another main residence that they sold at any time before the announcement of the stamp duty surcharge on November 26 2015.
Anyone who fits these criteria has until November 26 2018 – three years after the announcement in last year’s Autumn Statement – to buy an additional home without paying the extra stamp duty.
For example, a landlord who owns buy-to-let properties but currently lives in rented accommodation and sold their previous home before November 2015 can buy a new home without paying the surcharge.
S omeone who part-owns a property which is lived in by family, but does not own their own home, and sold a home before November 2015, would also be exempt.
In general, those who sell a main residence now have 36 months to buy a new one without paying the extra tax.
The Treasury confirmed the existence of the loophole after Telegraph Money was alerted to the relevant passage in the consultation document.
The paragraph reads: “The 36-month time period will commence from 25 November 2015 for those who had sold a previous main residence prior to the Spending Review and Autumn Statement 2015, in order to provide additional transitional support.”
Despite this, some borrowers may still be under the impression that they have to pay the surcharge, and after the announcement some letting organisations were continuing to advise borrowers that they would be liable.
To clear up the confusion, Kevin Hollinrake, the Conservative MP for Thirsk & Malton, has asked the Chancellor, George Osborne, to clarify the position in a written question to the Treasury.
When they buy a property, landlords are being asked to “self-certify” by ticking the right box for which rate of stamp duty they will be paying – so there is a concern that some may unknowingly volunteer to pay more tax than they need to.
Landlord Shirleyann Haig only realised she didn’t have to pay the higher rate to buy her family home when her husband noticed the passage in the consultation document.
“It’s a massive relief. There was so much confusion – everyone was interpreting it differently,” said Ms Haig, who owns 17 properties in Liverpool.
“For people who have had to move around, perhaps for work, and don’t own their own home, this will mean they don’t have to pay a huge tax bill.”
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The Cyprus Stamp Duty Law - What agreements / contracts should be officially stamped
The Cyprus Stamp Duty Law has been amended by Law 173(I)/2012 and it is effective since 1st March 2013.
The Cyprus Stamp Duty Law
"The Cyprus Stamp Duty Law (the “Law”) provides that stamp duty is payable on any document which concerns any property situated in the Republic of Cyprus or matters or things to be executed or done in the Republic of Cyprus, irrespective of the place of execution of the document. The Cyprus Stamp Duty Law has been amended by Law 173(I)/2012 and it is effective since 1st March 2013.
1. For Contracts with a value of €1 up to €5.000 there is no stamp duty payable.
2. For Contracts with a value between €5.000 up to €170.000 the stamp duty payable is of €1,50 for every €1.000.
3. For Contracts with a value over €170.000 the stamp duty payable is €2,00 for every €1.000 with a maximum stamp duty of €20.000.
If on an agreement or memorandum of agreement and all documents embodying any agreement there is no specific fixed value, then the stamp duty is €34.17.
The stamp duty is payable at once.
Specific Agreements - Documents
1. An agreement for the purchase of shares in a Cypriot company, which is executed in Cyprus, is not required to be stamped in Cyprus.
2. An instrument of transfer of shares in a Cypriot company, which is executed in Cyprus, is not required to be stamped in Cyprus.
3. An agreement for the purchase of the shares in a foreign company, which is executed in Cyprus, is not required to be stamped in Cyprus.
4. An instrument for the transfer of shares in a foreign company, which is executed in Cyprus, is not required to be stamped in Cyprus.
5. Loan Agreements executed in Cyprus. If the monies to be advanced under a loan agreement, which is executed in Cyprus, are not utilised in Cyprus and the loan is repaid from funds outside Cyprus, the loan agreement is not required to be stamped in Cyprus.
6. Pledge over the shares of a Cyprus company. Under recent court precedents such a document is subject to stamp duty because of the requirements to be done in Cyprus that affect its validity.
7. Pledges or Charges over the property of a Cyprus Company. Under recent court precedents such a document is subject to stamp duty because of the requirements to be done in Cyprus that affect its priority.
A document can be stamped
1. On or before the signing of that document
2. Within 30 days from the date the document was signed.
3. Stamping is possible even after the expiry of 30 days. However, certain fines apply which increase in correspondence with the delay.
Failure to stamp a document
Documents that are subject to stamp duty cannot be accepted as admissible evidence in Court-save for criminal proceedings- unless these documents are duly stamped (article. 36). In case a non-stamped document need to be submitted as evidence in Court proceedings, the document can be stamped even at this stage but the fines must be paid.
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