The government has published its intention to introduce relief for non-publicly funded fully mutual housing co-operatives from 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 tackle tax avoidance by companies, partnerships and collective investment schemes owning UK residential property.
Most housing co-operatives are already exempt from these taxes because they are registered providers but those that are non-publicly funded are not.
The Confederation of Co-operative Housing (CCH) said those hit by the changes include a new housing co-operative in Oxfordshire in 2017 that had received a very large bill for stamp duty land tax. They had funded their property purchase with an external loanstock issue which had meant they were treated as a collective investment scheme.
To protect other housing co-ops from the same problem, CCH teamed up with Co-operatives UK and Friendly Housing Action and in 2018 asked the government to provide an exemption.
They met Treasury and HMRC officials and were told their proposals were under consideration for the 2019 Budget. This was delayed by complications to the Brexit process and the general election but in this year’s spring budget the government plans for the new legislation.
The relief from annual tax on enveloped dwellings will be introduced retrospectively from 1 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.