A nervous disposition
Change to the SDLT deadline
From 1st March 2019, legislation being introduced by the Finance Bill 2018-19 means the deadline to file an SDLT return and pay SDLT will be cut from 30 days to 14 days after the effective date of the transaction. The “effective date” is usually the date of completion, but it can also be triggered by substantial performance, for example where a tenant is permitted early access to the property to carry out its fit-out works. The 14 day period includes non-working days and the reduced time limit will apply to transactions with an effective date on or after 1st March.
Penalties for late payment
Failure to file an SDLT return within the 14 day deadline will result in paying:
Failure to file an SDLT return within one year may also result in paying a tax-based penalty up to the maximum amount of SDLT payable on the transaction, i.e. your SDLT liability would double.
According to HMRC the changes are meant to “improve the efficiency of the SDLT system”.
For solicitors and conveyancers the reduced time-limit means we must make sure to front load transactions and deal with obtaining details, funds and approval of SDLT returns before completion. Many firms already do this, but it is also fairly common practice to finalise SDLT returns after completing a deal, once there is some downtime and dealing with post-completion wouldn’t detract from focusing on getting the transaction over the line.
Solicitors will need to be particularly careful when acting on complex commercial transactions where SDLT returns (including deferral applications) will now need to be finalised amidst the pressures of trying to meet an urgent completion deadline.
Extra care will need to be taken around extended bank holidays such as Easter and Christmas. For example, many firms would have had completions on 21st December 2018 and then closed for Christmas between 21st December 2018 and 2nd January 2019. Under the current 30-day time limit, after returning to the office on 2nd January there would still have been over two weeks to submit an SDLT return for transactions completing on the 21st December. Under the new 14-day time-limit, there would only have been one day left to submit the return and pay the SDLT.
For businesses, the reduced SDLT time-limit may mean that improvements need to be made to make management of internal systems and cash flow more efficient.
For individuals, the reduced SDLT time-limit means funds must be earmarked for SDLT sooner and buyers and tenants can expect to pay SDLT costs to their solicitors before completing the transaction. This is often a requirement in any case, but when I completed my purchase over a year ago I knew that after the completion date I had another month (i.e. another pay day) before I had to pay the SDLT funds to my solicitor. This flexibility will no longer be an option.
Although the reduced time-limit means less flexibility and more pressure on solicitors, businesses and individuals it does support best practice to deal with SDLT before the effective date. Putting a positive spin on the change, it may help to streamline transactions by getting all post-completion and financial statements dealt with prior to completion rather than the dreaded post-completion tidy up.
Just don’t get caught out –remember Solicitors Don’t Lose Time on Stamp Duty Land Tax (S.D.L.T. on SDLT).
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