The government is asking whether its proposed three per cent stamp duty surcharge on the purchase of second and subsequent homes should carry exemptions for certain categories of investor.

In a surprise move on Monday – reported on our sister publication Estate Agent Today – the government formally launched its consultation document on the surcharge, announced initially by Chancellor George Osborne in his Autumn Statement in late November.

The consultation sets out the details of the measure and then poses a series of questions.

Having set out one of the more controversial provisions, that the three per cent extra stamp duty should not apply to corporate entities purchasing 15 or more properties, the consultation document says: “Since [the Autumn Statement] the government has considered that there may be circumstances where significant investment by individual purchasers may positively contribute to development and the government’s housing objectives in the same way as investment by corporate purchasers, and so there may be circumstances in which it is justified to exempt purchases made by individuals from the higher rates.”

It then poses four specific questions:

Question 13: Do you agree that an exemption should be available to individual investors as well as all non-natural persons? Alternatively, is there evidence to suggest any exemption should be limited to only certain types of purchaser? If so, which types of purchaser?

Question 14: Do you think that either the bulk purchase of at least 15 residential properties or a portfolio test where a purchaser must own at least 15 residential properties are appropriate criteria for the exemption? Which would be better targeted?

Question 15: Are there better alternative or additional tests that could be used to better target an exemption and fulfil the government’s wider housing objectives?

Question 16: Are there any other issues or factors the government should take into account in designing an exemption from the higher rates?

Interested parties have only until February 1 to respond to the consultation. The document says the final version of the surcharge will then be confirmed in Osborne’s next Budget, on March 16 2016. 

The document makes it clear that the higher rates will only apply to purchases of additional residential property which complete on or after April 1 2016. If contracts exchanged after November 25 2015 – when the surcharge was first announced – then the higher rates will apply if the purchase is completed on or after April 1 2016.

However, if contracts were exchanged on or before November 25 2015 but not completed until on or after April 1 2016, the higher rates will not apply.

The consultation also gives a series of case studies, answering possible questions and addressing uncertainties in the original announcement by George Osborne.

For example, it says the three per cent surcharge may apply to parents buying a property with their children. And property owned elsewhere in the world will be taken into account in determining when determining the stamp duty to be paid on a property subsequently purchased in England, Wales or Northern Ireland – where SDLT applies.

Those who buy second or subsequent properties will not be able to ‘nominate’ one as their principle property – presumably to avoid high net worth buyers ‘choosing’ the one with the lowest value to be the ‘additional’ purchase liable to the surcharge.

The consultation is lengthy and also discusses joint ownership, married and civil partners, buying properties by parents for their children, what happens when a completion is delayed, and so on.

There is also consulation over how Multiple Dwelling Relief and/or SDLT may be applied in cases of multiple property purchases, as well as the treatment of large scale investors.

You can see the consultation document here.