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One minute with... Sara Maccallum

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What’s keeping you busy at work?

My firm specialises in private wealth and has a growing high value residential property team. We continue to see a lot of work coming through where we are assessing the correct rate of SDLT payable on residential property transactions. This involves analysis of the nature of property itself both rural and urban, what is being bought with it, whether the six+ rule can apply and issues around the SDLT surcharge for additional dwellings. That’s quite a lot of complexity for an area which non-tax specialists have to deal with.

If you could make one change to tax, what would it be?

I would scrap the part of the SDLT additional dwellings rule which takes account of properties held by non-residents outside the UK. This is something our international clients find very difficult to accept. They understand the policy of having a higher rate where someone owns multiple properties within the UK, but find it much harder to understand why their international holdings should have a bearing.

Are there any new rules that are causing a particular problem?

We are still working through the practicalities of the recent extension of NRCGT to all non-residents disposing of UK land, in particular where companies are concerned. As these are now chargeable to corporation tax not CGT, there are different deadlines and reporting requirements, which can cause particular difficulties when a straightforward offshore company holding one UK property disposes of it. Other changes, such as taxation of indirect disposals, will take a bit longer to make an impact, but it is already becoming clear there may be some double charging, particularly in de-enveloping cases.

Is there a recent tax case which has caught your eye?

The recent Hannover Leasing case ([2019] UKFTT 262 (TC)) on FA 2003 s 75A has caused real concern amongst SDLT practitioners as it demonstrates a willingness by HMRC to apply that section to a situation where there was no SDLT avoidance but rather a structure which enabled a saving of SDLT by being done in one way (a sale of units) instead of another (a sale of land). If correct, it leaves us having to give quite strong s 75A health warnings in many seemingly innocent cases. It has also created a high degree of uncertainty around HMRC's approach to the guidance in its manuals, which is of potentially wider application.

What are you looking out for later this year?

We are awaiting the results of the SDLT consultation on the non-UK resident surcharge. Regardless of the merits or otherwise of the surcharge, I am hoping for some changes in who is defined as a non-resident to bring some consistency with other residence rules. It seems unfair that individuals could be resident under the usual statutory residence test but non-resident for the surcharge.

Are you seeing any particular trends in terms of HMRC practice?

We are finding HMRC’s approach in enquiring into claims for relief from the 15% flat rate of SDLT to be increasingly rigorous. In our experience, it is almost a certainty that a land transaction return claiming such relief will be enquired into and various pieces of documentary evidence will be needed to substantiate the claim; for example, where the client is claiming relief because it will rent the property, HMRC wants to see statements evidencing rent received etc., as well as the tenancy and any marketing materials. It is a slightly surprising and time-consuming practice on high value purchases where the additional 3% rates now mean that many purchasers are paying SDLT at largely 15% anyway.

Finally, you might not know this about me but…

I love gardening and grow all my annual plants from seed to fill numerous pots around the garden. Now the planting is over, I am working on making a wildlife pond involving much digging. I find it a good way of completely switching off from tax.

Issue: 1446
Categories: One minute with