SDLTM27065 - Reliefs: Right to buy transactions, shared ownership leases etc: Shared ownership leases: treatment where market value election not made: effect of linked transactions rules FA03/SCH9/PARA4B

The grant of the lease and all staircasing transactions - including those which are exempt from charge by virtue of FA09/SCH9/PARA4A - are “linked transactions” for the purposes of FA03/S108 – see SDLTM10020.

The rate of stamp duty land tax chargeable on staircasing transactions above 80% is determined by the aggregate consideration for all the linked transactions.

Where the effective date of the grant of the lease was on or after 12 March 2008, the linked transactions rules do not apply retrospectively to charge a higher rate of stamp duty land tax on the initial grant of the shared ownership lease - FA03/SCH9/PARA4B. 

The linked transactions rules do not apply retrospectively to bring into charge staircasing transactions which are exempt from charge by virtue of FA09/SCH9/PARA4A. 

Where the original lease was granted before the implementation date of Finance Act 2003 (i.e. 1st December 2003), the staircasing transaction may be a “linked transaction” to the original lease. 

There would not be any SDLT due on the staircasing if an election had been made to pay the (old) stamp duty on the market value of the pre-implementation lease under section 97 Finance Act 1980 (as mentioned in FA03/Sch19/paragraph 7(2)(b)).

The staircasing transaction would not be linked to the lease if either:  

a.    the reversionary interest had been transferred to a landlord unconnected to the original landlord, or 

b.    the shared ownership lease had been assigned by the original lessee to a person unconnected with the original lessee.  

In March 2001, Mr Rogers purchased a 50% share of a house in the UK valued at £150,000 through a shared ownership scheme. Mr Rogers paid £75,000 for his 50% share and pays rent of £2,000 pa on the remaining 50%.  
 
He paid stamp duty on the 50% he purchased as follows: 
 
1% on the premium of £75,000 = £750 

12% on the rent of £2,000 = £240 

Total stamp duty paid = £990 

In January 2024 Mr Rogers would like to staircase to 100% ownership of the property. He owns no other property and the landlord is still the same as when he bought 50% in 2001. The property is now valued at £400,000. Mr Rogers pays £200,000 for the remaining 50% to own the property outright. 

The £75,000 he paid in 2001 and £200,000 he paid in 2024 are linked transactions. 

The SDLT calculation is as follows: 

Firstly, calculate the notional SDLT due on £275,000 usingthe SDLT rates at the time of the transaction = £3,750 (as at January 2024). 

Using this, calculate the SDLT due on the staircasing (£200,000 / £275,000 x £3,750) = £2,727 total SDLT due on this transaction. 

Please note the tax due will change if the SDLT rates change and you’ll need to use the current SDLT rates. 

For further examples of out how much SDLT to pay when you buy property through a shared ownership scheme, see here.