Tenants face stamp duty bills under periodic tenancies – Financial Times

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Tenants face stamp duty bills under periodic tenancies – Financial Times

The government is apparently working on a fix to an anomaly in the Renters’ Rights Act that could see huge numbers of tenants paying stamp duty.

According to the Financial Times, under current tax rules, an indefinite or periodic tenancy requires a stamp duty land tax calculation each year.

Liability is triggered once cumulative rent paid reaches £125,000, at which point tax becomes due.

To illustrate the point, the newspaper highlights a student let in London with eight friends paying £1,000 a month. That would equate to £96,000 annually and under the Act, the students would be a facing a stamp duty bill of £573 just after a year.

Tenants will face the bill from May when assured shorthold tenancies are scrapped and replaced with periodic tenancies.

Stamp duty on leases

The Financial Times reports that around 150,000 private renting households could fall within scope within three years, rising to 250,000 by 2031 as tenancies roll on.

Stamp duty on leases is charged at 1% of the net present value of rent above the £125,000 threshold.

While the sums involved are usually small, the administrative burden is not.

Tenants would need to calculate and submit returns annually; a process the paper says they are likely to expect or understand.

Tenants will need to file a return

Tenants will also need to know that late filing attracts an automatic £100 penalty, rising to £200 after three months.

However, reaching the stamp duty threshold would take time for most renters.

The average London tenant would need around six years of occupation before cumulative rent hits £125,000.

Periodic tenancies could be liable

A government official confirmed to the FT that newly defined periodic tenancies could become liable but said the vast majority of private tenants would never reach that point.

The official added that where a lease is renewed following renegotiation, the term is treated as starting again, limiting exposure.

They also said that any changes needed to ‘accommodate the new tenancy system’ would be announced in a Budget.

One option under consideration would be to delay filing and payment until the stamp duty due reaches £5,000.

That would restrict liability to high-value properties after many years of occupation.

A government spokesperson told the FT: “The department is aware of the potential issue, and we are looking at how best to resolve [it].

“It is not an immediate problem for any tenant.

“No one will be affected until the rent they are paying is worth more than £125,000 — which would take most tenants more than seven years.”

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Damp and mould remain major issues in temporary accommodation

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Damp and mould remain major issues in temporary accommodation

A third of temporary accommodation is deemed inappropriate and poses a risk to tenants, with more than half showing signs of damp and mould, according to new data.

Findings by Switch Management reveal that, despite Awaab’s Law coming into force last year for social housing, local authorities are still struggling to deal with damp and mould in temporary accommodation, as many continue to rely on bed and breakfast placements.

The findings come amid warnings from housing charities that temporary accommodation has become a “normalised emergency”.

Challenge for many councils is having the capacity and systems in place

Awaab’s Law requires all social housing landlords, including councils that manage housing, to fix dangerous damp and mould within strict timeframes and to complete emergency repairs within 24 hours.

The findings are based on 1,800 calls with tenants living in temporary accommodation, alongside 600 visits to bed and breakfasts and hostels being used as temporary accommodation.

The data shows that 50% of on-site inspections identified signs of damp, mould, infestations or other hazards, while 30% of rooms were deemed inappropriate and posed a risk to tenants.

John Angus, managing director of Switch Management, said many councils are struggling to keep pace with their responsibilities.

He said: “Proactive tenant engagement is now a critical part of compliance, particularly in temporary accommodation, where conditions and tenancies can change rapidly.

“Awaab’s Law sets clear, legally binding expectations around how damp and mould must be identified, recorded and resolved. The challenge for many councils is having the capacity and systems in place to deliver and evidence compliance across large and often complex portfolios.

“Our review highlights that it will be extremely difficult for existing council teams to complete the surveys and visits.”

Temporary accommodation statistics have become normalised

The news comes after housing charities gave evidence to the Housing Select committee on the conditions in temporary accommodation.

Matt Downie, chief executive of Crisis, claimed the temporary accommodation crisis was becoming a normalised emergency.

He told the committee: “When the records are broken every time new statistics come through, not just for temporary accommodation but children in temporary accommodation, there appears no way of generating greater political expediency through the statistics because they’re normalised.

“The use of temporary accommodation, the conditions of temporary accommodation and the fact that people are having to be advised all the time, unless you put up with it, you’ll be intentionally homeless. It’s very distressing for everybody involved.

Mr Downie says the focus should not be on temporary accommodation alone, as it represents only a part of the wider housing crisis.

He said: “I think it’s something that requires both a sense of political activity and urgency in how it is dealt with.

“It also cannot be thought of simply as an issue of temporary accommodation, because it is a subset of the wider housing crisis we have. If we just think about how to have better temporary accommodation, we’ll lose sight of the bigger picture.”

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