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December questions and answers

Q. I am currently in the process of purchasing a property which includes a separate granny annex. Since there is only one title number for the whole property, can I apply for stamp duty land tax multiple dwelling relief (MDR)?

A: Since 1 April 2018 SDLT applies to land transactions in England and Northern Ireland only. Property transactions in Scotland are subject to Land and Buildings Transaction Tax. Land Transaction Tax (LTT) applies to land transactions in Wales.

Broadly, if the granny annex is an independent dwelling, then it will count for MDR. If it cannot exist independently of the main house, then MDR will not be available.

The HMRC Stamp Duty Land Tax Manual states (SDLTM29955):

‘For the purposes of the relief a ‘dwelling’ means a building or part of a building which is suitable for use as a single dwelling or is in the process of being constructed or adapted for such use.’

Special rules apply to certain types of dwellings, including halls of residence and ‘off plan’ transactions. See the HMRC Stamp Duty Land Tax Manual for further information.

Q. Ten years ago my husband inherited a share of his father’s property when he died as a joint owner with his partner. My father-in-law’s Will specified that his surviving partner could continue living in the property for as long as she wanted. Both my husband and my deceased father-in-law’s partner are on the deeds for the property. The partner has recently died and the property is empty. Will my husband have to pay capital gains tax on his share when it is sold, even though he could not live there because the partner was in residence?

A: It is assumed that your husband is now in possession of the whole property, even though originally the partner owned half of it. If so, she must have transferred her half to him. When your husband sells the property, for capital gains tax purposes he will effectively be making two sales, namely the half which he inherited on his father’s death and the half he has recently acquired from the deceased partner. He will be liable to capital gains tax on the half he has owned for the last ten years, even though the partner was still living there. He will also be liable to capital gains tax on the recently acquired half. However, the base cost for the second half will be the market value of that half at the date the partner transferred it to him. The higher base cost should help is should help reduce the chargeable gain on that part.

Q. I have a new employee who has only been with me for two weeks. Yesterday the employee called in sick. Do I have to pay statutory sick pay (SSP)?

A: There are conditions that an employee must meet to be eligible for the payment of SSP, which are broadly as follows;

– the individual must be classed as an employee and have done some work for their employer;
– the employee must have average weekly earnings (AWE) of at least £120 per week (NIC Lower Earnings Limit for 2020/21 tax year);
– The employee must have been sick from work for at least four days in a row including non-working days. This period is known as a Period of Incapacity for Work. (PIW)

An employee’s AWE is generally calculated by reference to the eight weeks of earnings prior to the employee being sick from work. In this case, the employee has not worked for you for eight weeks so these rules do not apply. The Regulations state that AWE will be calculated using the earnings the employee is entitled to under their contract for:

– a week’s work;
– a calendar month of work multiplied by 12 and then divided into 52; or
– an annual salary divided into 52.

If the employee has received less than eight week’s pay prior to their PIW starting, then the relevant period is calculated by using all the earnings paid before the PIW and the period those earnings relate to. So if an employee has received two weeks of earnings, then those earnings are added up and divided by two. This gives the AWE figure to determine whether the employee has earned enough to qualify for a SSP payment.

SSP is payable from day four of a sickness absence if the above conditions have been met and a PIW has been formed. The SSP rate is currently £95.85 per week for the tax year 2020/21.

Note that if the employee is away from work due to a Covid-19 related absence, both the eligibility conditions still need to be met and the PIW still needs to be formed, but the requirement for three waiting days has been suspended for these types of absences and SSP would be payable from day one of the absence.

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