Stamp duty surcharge on “granny flats” axed

Property experts have welcomed the Government's decision to scrap the 3% stamp duty surcharge on "granny flats".

In the original version of the surcharge rules, an annexe with separate access to the main property was classed as a second home and would attract the 3% extra charge if valued at more than £40,000.

It meant the prospective buyers would face a larger tax bill as they would pay the 3% surcharge on the value of the granny flat as well.

Now the change has been dropped following an intervention by Sir Eric Pickles.

The Financial Secretary to the Treasury, David Gauke, has agreed to amend the rules on annexes.

Pickles, the former secretary of state for communities and local government, said he was grateful for the change.

“It is important in terms of social policy, as annexes are used not only by elderly relatives but by other family members, disabled children with special needs and so on.

“The Government is making an important statement that these annexes should prosper.”

Jeremy Leaf, a former RICS chairman and north London estate agent, said the Government had been trying to defend the indefensible.

“How would a granny flat tax surcharge have operated? How would it be enforced? Who would carry out the valuations?

“Would it apply to separate businesses as well as granny annexes?

“And perhaps, more pertinently, how much additional revenue would it have raised?

“In genuine cases, elderly parents and grandparents may have been forced into care homes and away from their families, which surely would have been contrary to the original intention.”

Leaf said common sense has prevailed. "The Government realises that it simply wouldn’t have worked.”