HM Treasury published an Open Consultation regarding the higher rates of stamp duty land tax (SDLT) on purchases of additional residential properties on the 28th of December 2015. Controversially, the closing date for this consultation is on the 1st of February 2016, which many in the property industry feel is insufficient time to respond to the proposals and make more appropriate suggestions.

Government will consider all responses before confirming the final policy design at the Budget on 16 March 2016 and if you wish to respond to the open consultation you need to visit the link below: http://www.gov.uk/government/consultations/consultation-on-higher-rates-of-stamp-duty-land-tax-sdlt-on-purchases-of-additional-residential-properties

More details have been provided on when the higher tax rate will and won't apply and below I have selected some key points that were not widely reported first time around, or where there were some elements of confusion.

The Five Point Plan
Alongside delivering 400,000 affordable housing starts by 2020-21, extending the Right to Buy to housing association tenants, accelerating housing supply and introducing London Help to Buy, the Five Point Plan includes the introduction of higher rates of SDLT on purchases of additional residential properties.

The higher rates will be 3% above the current SDLT rates, and will take effect from 1 April 2016. The higher rates will apply to most purchases of additional residential properties in England, Wales and Northern Ireland (and Scotland has since announced that it will also charge an extra 3%) where, at the end of the day of the transaction, individual purchasers own two or more residential properties and are not replacing their main residence.

Government estimates around 90% of residential property transactions in England, Wales and Northern Ireland will not pay the higher rates of SDLT. Those that do can expect to pay around five times more than a normal homebuyer.

Example 1:
An additional residential property is purchased for £200,000. SDLT is calculated as follows: 3% on the first £125,000 = £3,750. 5% on the remaining £75,000 (the portion between £125,000 and £200,000) = £3,750. The total SDLT due is therefore: £3,750 + £3,750 = £7,500. However, someone buying the same £200,000 home as a main residence will pay just 2% on the £75,000 portion, or just £1,500.

Exemption for your main residence
There was initial confusion regarding whether a landlord would have to pay an extra 3% SDLT if he/she changed their main residence. They do not.

Example 2:
A owns both a main residence and a second home. She sells her main residence and purchases a new one. Although she has two properties at the end of the day of the transaction, she has replaced her main residence so the higher rates will not apply.

Example 3:
Mr. H owns a main residence. He is purchasing a new main residence, but rather than selling his previous main residence he will rent it out. At the end of the day of the transaction he owns two properties and is not replacing a main residence (as he is not selling his previous main residence), so the higher rates will apply.

Example 4:
At the end of the day of the transaction, he owns 11 properties – his new main residence and his 10 buy-to-let properties. However, as he has replaced his main residence he will not pay the higher rates of SDLT.

18 months to buy and sell your main home
There were also concerns that people moving to a new home that needs extensive renovation, and that can afford to buy without selling their home first, would have to pay the higher SDLT on their new home. They won't...as long as they sell their main residence within 18 months of buying their new home.

However, the paper states: 'It may be difficult to determine whether an individual has an intention to sell their previous residential property at this point, and a careful balance needs to be struck by the government to ensure that the tax system remains robust to tax avoidance and abuse. Therefore, the government proposes that the higher rates of SDLT should apply to such transactions. To ensure fairness, the government proposes to introduce a refund mechanism for those who sell their previous main residence within 18 months of the purchase of the new main residence.'

This will obviously be a huge inconvenience for homeowners that will have to pay an extra 3% SDLT charge on the purchase of their new home in cash, which they obviously need to pay builders etc., and then claim it back at a later date. It is however, great news for providers of short term finance i.e. bridging loans.

Other queries
There are numerous other queries, which I have put into bullet points:

* Will overseas buyers have an advantage? Government says that 'property owned globally' will be relevant as to whether the higher SDLT should be applied. But how would they know if the buyer owns property overseas or not?

* Is there an incentive not to be or to get married? If you are a couple and you buy a second, jointly owned property, or if one of you owns another property and you jointly buy a second home, you will pay the higher rate on you second purchase. However, if you remain single, one can own your rental property and the other can buy the main residence, with no extra SDLT charge.

* Buying a property for your child? Then it is better to put the property in their name so you don't pay the higher SDLT charge.

* If you own several furnished holiday lets and want to keep expanding your portfolio, you will have to keep paying the higher SDLT charge. However, if you convert the properties into timeshare properties, then you should be able to keep buying without paying the higher SDLT charge.

* If you really resent having to pay more in SDLT next year then you could simply switch your portfolio growth into the sub-£40,000 sector, which will remain free from higher SDLT as 'residential properties worth less than £40,000 will not be taken into account when determining if an additional residential property is being purchased.'

* Buy shops with flats above or offices/pubs etc. that can be converted into flats. These are classed as non-residential property purchases and are not subject to higher rates of SDLT. Interestingly, '6 or more residential properties bought in a single transaction' is also classed as 'non-residential property'.

* Finally, Government is also considering an exemption from the higher rates for those making significant investments in residential property. However, few details were provided as to what constitutes a 'significant investment' so this is still a grey area.