At the end of a holiday, one usually experiences a satisfying completion to something looked forward to and enjoyed. This was not the case with the Stamp Duty Land Tax holiday! On the other hand, many people were looking at the end of March with apprehension combined with hope that the “holiday” would be extended. The exemption of stamp duty land tax on the first GBP 500,000 on property sales was due to end on 31 March 2021. Professional agents and brokers all over the country, including the estate agents in Buckingham, were well aware of the race to beat the cut-off. They also understood the overload of pressure in order to complete documentation in time.
So it was a welcome break for many, whose applications were still pending, when the new Budget was announced including the extension of the SDLT holiday – till the end of June 2021, with a phasing out programme till the end of September of this year!
However, there are still mixed feelings about this extension:
Pros:
As many as 160,000 applicants, who would otherwise have lost out on the deal, can now have the legal documentation completed in time to avail of the benefit.
A larger number of property sale transactions will take place, which will also have an effect on property prices and, as a result, the economy.
Many people will be able to move to better places, which would otherwise be unaffordable. This in turn will help the property market.
Had the SDLT holiday not been extended, as many as “one in five property deals” would not have gone through. Now, these applicants will not miss the cut-off date. This, in turn, will positively affect the housing market as well.
With the lockdowns, even though the housing market remained open, the delays in process of applications have escalated. Since the “holiday” is now extended, it will provide time to complete deals which had been delayed due to the pandemic situation.
Cons:
Some are of the opinion that the extension of the SDLT holiday will not be beneficial as there are doubts as to whether it will be long enough to push all pending applications through. Thus, it will end in disappointment for those whose deals are not able to make the next cut-off date.
It will lead to more people applying to take advantage of the tax benefit and, as a result, end up in the same way – more would-be buyers missing the next deadline.
Now that the extension has been notified, there will be a backlog of pending applications to go through for completion of formalities. Added to this will be many new applications to deal with.
The demand has exceeded the supply, especially with logistics, and the authorities are trying to cope with completion of the documentation – from valuations, mortgages, conveyancing and legal issues – amidst the shortfalls (illness, shortage of staff, lockdowns) caused by the pandemic. Since the date has been extended, the demand will rise, causing further delays and more disappointments.
There is an unusual positive aspect to when the SDLT holiday ends. Studies have shown that landlords are going to continue to purchase property even if they have to pay SDLT. Also, because of the rise in price of properties due to the exemption of this tax, some may benefit by missing the deadline! Instead of saving on tax and paying much more for a house, they may be able to get a good bargain later on instead of “buying in haste only to repent at leisure”.
Median: The matter of “substantial performance” has arisen. A contract is substantially performed when the whole or a large amount of the consideration is paid or when the purchaser takes possession of the whole or substantially a large portion of the land. Generally, the “effective date” of a property transaction is the date of completion. However, according to law, when the contract is substantially performed prior to completion, the effective date is the date of “substantial performance”. This applies more to commercial properties; there are very few residential cases where this is applicable. It may or may not have an impact when the SDLT holiday comes to an end.
Conclusion: Now that the extension of the SDLT holiday has come into effect, delays in completion of documentation, which have arisen because of the pandemic and due to no fault of the buyer or seller, can now be overcome and the cases completed. Thus, the concerned people will not be deprived and lose out on sale deeds which were agreed to in the given period. Some are pleased with the extension till June, with a phasing out period till the end of September. All in all, there is a general feeling of relief that the race to beat the cut-off is still in progress and is being allowed to carry on!