Clause 81 continues on stamp duty land tax and relates to rent to shared ownership schemes. It seeks to amend schedule 9 to the 2003 Act. In general, it seeks to simplify the tax position of tenants who are in a Rent to HomeBuy arrangement with a social housing provider. As members of the Committee will be aware, HomeBuy schemes allow tenants to enter into agreement with a provider to purchase slivers of equity in a property, owning a share of the leasehold and continuing to pay rent on the remainder. That percentage can obviously vary based on local circumstances, or even by individual scheme.
One barrier to participation in HomeBuy schemes is the need to provide a deposit in order to be granted a mortgage. Rent to HomeBuy, called rent to shared ownership in clause 81, is the Governments proposed solution. It is designed to help tenants enter a HomeBuy scheme at a future date by giving them up to five years tenancy in which to save for a deposit. The rent is discounted at 80 per cent. or less of market rates. During the rental period the tenants have first option to purchase a minimum 25 per cent. stake in the property they are occupying, either outright or through a mortgage. If they fail to do so when their assured shorthold tenancy expires, the tenancy is reviewed and may be terminated.
One might question particular details of this modelI do not think this Committee sitting is really the most appropriate way to look at thatbut one might question particular details without necessarily questioning the general HomeBuy concept, which on these Benches has certainly found a great deal of favour. However, it seems wrong that a tenant who goes on to purchase a stake in a property may become retrospectively liable for stamp duty land taxthat is, from earlier in the shorthold tenancy. We therefore welcome the aim of clause 81, which is to make the charge payable when, and only when, that shared ownership commences. It also detaches occupancy under the shorthold tenancy from the start date of shared ownership: again, something that seems proper in this context.
However, the second element that I have just outlined may be unnecessary. This is where amendments 260 and 261 come in. The amendments we have tabled do not intend to alter the scope or effect of the clause; rather they reflect the concern expressed to me by the Law Society that the wider principle governing the applicability of possession towards stamp duty liability is called into question. I understand that the principle is set out in paragraph 7,900 of the stamp duty land tax manual. I am not sure why there are 7,900 paragraphs. I hope that I am reading that correctly and that it is not 79.00 or somethingI am told that it is 7,900. That paragraph states that HMRC will, other things being equal, take the view that when
the purchaser already has occupation of the premises under a different interest, for example when the purchase is of a freehold and the purchaser is a tenant, substantial performance will not be triggered at the time of the contract as long as the purchaser adheres to the covenants in the lease.
The Law Society believes that that already protects Rent to HomeBuy tenants, and makes two arguments. First, it argues that that principle makes the Governments new sub-paragraphs 13(4) and 14(4) to schedule 9 of the Finance Act 2003 unnecessary. Secondly, it argues that by including those new paragraphs the Government are suggesting that there is some doubt about the principle and its general applicability, which in turn might cause a loss of confidence among practitioners. Legal uncertainty is in all circumstances best avoided, and I should be grateful if the Minister would specifically address that concern.
As I have said, this is a technical matter and we do not oppose the Governments intentions in the clause. If there are good reasons for including those sub-paragraphs, we will happily not press the amendments. If there are good reasons, however, that would also suggest that HMRCs guidance needs reinforcement, and hence potential statutory inclusion in other areas of the relevant legislation.
I think that new sub-paragraphs 13(4) and 14(4) serve a useful purpose, and I will attempt to persuade the hon. Gentleman of that.
Those sub-paragraphs modify the stamp duty land tax effective date provisions for the purposes of rent to shared ownership schemes. Such schemes can be structured in a number of ways. The structure referred to in those sub-paragraphs involves a purchaser entering into a contract to purchase a share of a property through a shared ownership lease or trust but delaying completion for a pre-specified time, during which the purchaser occupies the property as a tenant and pays a reduced rent, which gives them the chance to save for the deposit that they will need to purchase their share of the property. Under the normal effective date provisions, occupation of the property in that way would cause stamp duty to be payable before completion. The modification of the effective date provisions in clause 81 ensures that the purchaser does not have to pay stamp duty until they have purchased their share of the property. Normally they would have to pay it when they signed the contract, which would be earlier than we would wish.
I would welcome some clarification on how the community land trust model would potentially fit here. I might be completely wrong and this might be totally irrelevant, but in that model a similar equity stake in a property is bought over time. Has HMRC given any consideration to what might need to be put in place to deal with that model when it comes forward?
I think that I will have to reflect on that question and come back to my hon. Friend, but she is absolutely right about the importance of the arrangements.
Among the interesting aspects of my preparatory work for the debate on this clause were the figures for the numbers of people who have taken advantage of the Rent to HomeBuy option addressed here. I have been given a note that states that by the end of March that figure was just over 1,000, and by the end of May almost 5,000. The model that is addressed here is therefore proving popular, and is one that people want to take advantage of in the current difficult economic circumstances. It is right that they should be able to do that. The Conservative amendments would directly disadvantage the purchaser under such a rent to shared ownership scheme, by making them liable to pay stamp duty at the very time when they are trying to save for a deposit. That is the purpose of allowing the dates to be deferred in such a way.
HMRC will update its guidance, as the hon. Member for Hammersmith and Fulham suggested. I think that subjecting purchasers to the normal effective date provisions would make them liable for stamp duty land tax when they are trying to save for a deposit and least able to afford it. On the subject of well known paragraph 7,900, I shall point out that there are not 7,900 paragraphs; it is simply a feature of the online numbering, which perhaps gives an exaggerated impression of how many paragraphs there are.