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Propertymark attends first WRA Tax Forum

Thursday 01 November 2018

Last week, NAEA Propertymark attended the Welsh Revenue Authority’s (WRA) first Tax Forum in Cardiff, following their appointment as the new tax authority for Wales.

Land Transaction Tax (LTT) replaced Stamp Duty Land Tax in Wales from 1 April 2018, and the Welsh Revenue Authority (WRA) are now responsible for the collection and management of this devolved Welsh Tax on behalf of the Welsh Government.

When the legislation was first developed, NAEA Propertymark played a key role in lobbying for tax bands more suited to the value of property in Wales. We attended a stakeholder roundtable discussion with Assembly members, provided written evidence and our Chief Executive, Mark Hayward, gave evidence to the Finance Committee’s inquiry into LTT.

Tax Forum

The Tax Forum was attended by industry stakeholders from various sectors. Chief Executive of the Welsh Revenue Authority, Dyfed Alsop (pictured with Tim Douglas, Senior Policy and Campaigns Officer at Propertymark) provided an insight into the WRA’s first year in existence.

Since starting operations on 1 April 2018, 1,800 organisations have registered for online LTT and the WRA have received 25,550 notifiable LTT transactions up to and including August 2018 with £90.6 million in LTT due. The WRA also collects and manages Landfill Disposals Tax (LDT), and has around 60 members of staff and is 100 per cent cloud based.

Representatives from the Welsh Treasury, part of the Welsh Government, were at the event to talk about the introduction of Welsh rates of income tax on 6 April 2019. From that date, some of the income tax paid by people living in Wales will be transferred directly to the Welsh Government for spending on public services in Wales, in return for a corresponding reduction in the block grant provided to the Welsh Government. The UK Government will reduce each of the three income tax rates (basic, higher and additional) for Welsh tax payers by 10 pence, and the Welsh Government must decide whether to re-apply each 10 pence (as a Welsh rate of income tax) or whether to vary the rates. The Welsh Government announced recently in its draft Budget that it would set the Welsh rates of income tax for 2019-20 at 10 pence, which means Welsh taxpayers will pay the same income tax as taxpayers living in England and Northern Ireland. HMRC will continue to collect all income tax in Wales, including the Welsh rates of income tax.

Higher Rates

The event included informative workshops which highlighting the main misunderstandings consumers are facing. Key issues that the WRA are keen to outline were filling LTT for higher rates and best practice on completing an LTT return.

When it comes to LTT, higher rates may need to be paid when the purchaser of a residential property already owns one or more residential properties. However, importantly, if they are replacing their main residence the higher rates may not apply - we know, confusing.

Essentially, the higher rates apply when an individual, buying on their own or with others, buys a major interest in one or more properties, and the relevant conditions are met and none of the exclusions apply. Where there are two or more buyers who are individuals, the higher rates rules apply if they apply to any one of the buyers.

Where the buyer, or each of the buyers is an individual buying a single property the conditions are:

  • the buyer, or buyers, are all individuals;
  • the main subject matter of the transaction is a major interest in a property;
  • the chargeable consideration given for that major interest is £40,000 or more;
  • the buyer, or one of the buyers, has a major interest in another property at the end of the day of the effective date of the transaction; and,
  • the interest in that other property has a market value, on the effective date of the acquisition of the major interest in the new property, of £40,000 or more;
  • the interest acquired is not subject to a lease for an unexpired term of more than 21 years to someone who is not connected with the buyer.

Where the buyer, or each of the buyers is an individual buying two or more properties the conditions are:

  • the buyer, or buyers, are all individuals;
  • the main subject matter of the transaction consists of major interests in two or more properties and at least two of the purchased dwellings meet the conditions;
  • the chargeable consideration given on a just and reasonable basis for that major interest in the purchased property is £40,000 or more.

Interim Transaction Rule

The purchase of a new main residence will not be chargeable to LTT at the higher rate if a previous main residence was disposed of. However, if the seller purchases another property (e.g. buy-to-let) before completion of the purchase of a new main residence, the seller may be required to ‘look back’ to that intermediate transaction and pay the higher rates.

Replacing a main residence

Similarly to Stamp Duty, in Wales where an individual sells their main residence and replaces it with a new only or main residence either within three years before the sale of the former main residence, or within three years after the main residence is sold, they are subject to pay the standard rate of LTT on the transaction rather than the higher rates.

The WRA emphasised that where the main residence is disposed of within three years after the replacement is acquired, the taxpayer must apply the higher rates rules to the transaction on the effective date of the relevant transaction and pay the higher rates of LTT. If the relevant conditions for the replacement of main residence are met, the taxpayer may claim a repayment.

LTT returns

When a tax return is submitted online, a unique transaction reference number (UTRN) will be produced immediately in an individual’s online account. Individuals will then need to use this UTRN when they make a payment. All the information needed to make the payment is included in the payment slip which can be downloaded when individuals submit their return. Payments need to be completed within 30 days from the day after the effective date of transaction (which is typically the date of purchase), so the WRA are keen for individuals to make full use of this time.

For queries about payments contact the WRA directly on 03000 254 000.

WRA Tax Calculator

Members can use and signpost individuals to the WRA Tax Calculator to work out how much tax they will pay.

The WRA will be hosting webinars in November and are developing an online questionnaire via the WRA website to assist individuals to understand the higher rates system and how much they will pay. Further information will be announced via the WRA website shortly, so keep your eyes peeled.