Property Taxation

Residential property transactions are likely to attract Stamp Duty Land Tax or Land Transaction Tax in Wales when they purchase a property. Until 31 March 2021 buyers of residential property for £500,000 or less will not pay any SDLT; the rates and reliefs are set out apply from 1 April 2021.

First time buyers of residential property for £500,000 or less can claim relief from SDLT. They do not pay anything on purchases up to £300,000 and pay 5% on apportion from £300,001 to £500,000. Details on rates of SDLT can be found here.  

In Wales they will have to pay LTT. There is no relief for first time residential buyers for LTT. The rates at which tax is charged is also different. The rates for LTT can be found here.

Solicitors also need to be aware of capital gains tax. Capital gains is charged on gains made on chargeable asses within the meaning of the taxation of Chargeable Grants Act 1992. This will include leasehold and freehold property. The tax is charged on the gain in a sale of a property and is calculated by deducting the purchase of the property from its current sale price. Certain forms of expenditure incurred in acquiring or improving the property can also be deducted in appropriate cases.

A seller of a residential property is likely to be able to claim the benefit of a Principal Private Residence Relief PPRR if the sale of an individual dwelling house is used as their only or main residence. To qualify the seller must have occupied the dwelling house as their only or main residence throughout the period of ownership. If an individual has more than one residence they can choose which of their residences will qualify for PPRR by making an election to HMRC. Certain periods of absence are allowed. If the seller of a garden has more than 0.5 acres the gain on the excess is chargeable to CGT unless the seller can demonstrate to HMRC that the extra garden was necessary for the reasonable enjoyment of the house.

It is also important for solicitors to know something about planning laws. This will affect whether a building can be built, altered or extended and also specifies the particular use to which a property can be put.

Sections 56 and 57(1) of the Town and County Planning Act 1990 states that planning permission is required for carrying out any development of land. ‘Development’ is defined by Section 55 of the TCPA as carrying out of building engineering mining or other operations in on over or under land or the making of any material change in the use of any building.

(1) Subject to the following provisions of this section, in this Act, except where the context otherwise requires, “development,” means the carrying out of building, engineering, mining or other operations in, on, over or under land, or the making of any material change in the use of any buildings or other land.

(1A) For the purposes of this Act, “building operations” includes—

(a) demolition of buildings;

(b) rebuilding;

(c) structural alterations of or additions to buildings; and

(d) other operations normally undertaken by a person carrying on business as a builder

Some things are explicitly excluded from this definition such as the carrying out of maintenance and improvement or other alteration of any building or works which only affect the interior of a building or do not materially affect the external appearance.

Once planning permission has been obtained it continues to exist for the benefit of the land for all persons for the time being interested in it. A grant of planning permission will usually say that it has to be implemented within a certain time and will lapse if not implemented during that time.

Even if development within the definition of Section 55 is proposed it is not always necessary to apply expressly for planning permission as in some cases it is automatically granted under the The Town and Country Planning (General Permitted Development) (England) Order 2015 ( commonly referred to as GPDO. The most common categories of development which are granted automatic planning permission under the GDPO are developments with the curtilage of a dwelling house and such extensions below a certain size and minor operations such as painting the exterior of a building or installing a CCTV camera.

The LPA has a range of action it can take if someone develops a property in contravention of planning control. An enforcement notice can be issued where it appears to the LPA that there has been a breach of any type of planning control and it is expedite to issue the notice in light of its planning policies for the area. An enforcement notice cannot become effective until 28 days after it has been served and its effect is suspended if the recipient appeals it so the LPA can serve a stop notice bringing activity in breach of planning control to an end before the enforcement date takes effect. A stop notice cannot be served as a method of enforcement in its own right but an enforcement notice must be served first. However an LPA can serve a temporary stop notice effective for 28 days only which gives time for further investigations.