The Government has published its intention to introduce relief for non-publicly funded fully mutual housing co-operatives from paying Annual Tax on Enveloped Dwellings and the higher Stamp Duty Land Tax rate of 15% on properties costing more than
£500,000 in the Finance Act 2021-22.
These taxes were introduced to counter tax avoidance by companies, partnerships and collective investment schemes owning UK residential property. Most housing cooperatives are already exempt from these taxes because they are Registered Providers but those that are non-publicly funded are not.
CCH was approached by a newly established housing co-operative in Oxfordshire in 2017 that had received a very large bill for Stamp Duty Land Tax which it had not planned for. They had funded their property purchase with an external loanstock issue which had meant they were treated as a collective investment scheme for tax purposes. They asked CCH for help and whilst it would not have been possible to gain a retrospective relief for that housing co-operative, CCH was determined to prevent other housing co-operatives from being caught up in measures which were not originally intended to penalise them.
CCH, along with Co-operatives UK and Friendly Housing Action, first approached the Government about seeking relief from these taxes in February 2018. After securing the backing of the Financial Secretary to the Treasury, we held a constructive meeting with HM Treasury and HMRC officials and were subsequently informed that our proposals were under consideration and would be included in the 2019 Budget. Events relating to exiting the European Union and last year’s General Election delayed matters. In the Spring Budget 2020 the Government announced they would introduce legislation through the Finance Bill 2020-21, and they published their intention to legislate in the Finance Act 2021-22 on 21st July 2020.
The relief from Annual Tax on Enveloped Dwellings will be introduced retrospectively from 1st April 2020 and will allow eligible housing co-operatives to claim a refund for 2020-21; the relief from the 15% rate of Stamp Duty Land Tax will come into effect for properties purchased after the Autumn Budget 2020.