Land Transaction Tax replaces SDLT in Wales

On 1 April 2018, Land Transaction Tax (LTT) replaced Stamp Duty Land Tax (SDLT) for properties purchased in Wales.

This means that the new rates of LTT will apply to transactions which complete on or after 1 April 2018. Transitional provisions will apply if and to the extent that contracts were exchanged on the property in question before 17 December 2014 (and certain conditions apply). In practice, this means that LTT will apply to most transactions involving Welsh land from now on.

The Welsh Revenue Authority’s (WRA) general policy is to increase revenue from higher value commercial and residential properties while giving purchasers of lower value residential properties a more generous tax structure. This can principally be seen from the WRA’s introduction of: (i) a new 6% rate of tax on non-residential/mixed use property valued at over £1 million (compared with 5% under the SDLT regime); (ii) the introduction of a 7.5% rate on residential properties valued between £400,001-£750,000 (compared with 5% under the SDLT regime); and (iii) the increased threshold on residential properties from £125,000 under SDLT to £180,000 under LTT.

A new LTT return must be filed within 30 days of purchasing land in Wales, as well as for land which straddles the England-Wales border and single transactions containing land/property situated both in England and Wales.

In addition to the new rates introduced by LTT, there are a few key procedural changes to be aware of:

1. Penalties for late filing of LTT returns or late payment of LTT will be cumulative rather than a fixed amount, and based on the amount of tax outstanding.
2. The enquiry window available to the WRA to check LTT returns will be 12 months, rather than the shorter nine month window available to HMRC for SDLT returns.
3. A new anti-avoidance rule has been introduced which captures ‘artificial tax avoidance arrangements’. This is wider than the general anti-abuse rule applicable to SDLT.
4. Where land/property is purchased both in Wales and in England (or Scotland) in a single transaction, the transactions will not be treated as linked. Instead, each property will be able to benefit from a nil rate band under the LTT and SDLT (or LBTT) rules. Note however, that the linked transactions rules will continue to apply to the extent that more than one property is purchased in each country, with the effect that the rate of tax payable will be determined by the total consideration paid for all such properties.

There are currently no plans to reduce the timescale for LTT returns from 30 days to 14 days, as is planned for SDLT from 1 April 2019.