There has been a broad welcome for what would appear to be a government U-turn over the imposition of the stamp duty surcharge on granny annexes.

The Daily Telegraph – which has been campaigning on the issue for some weeks – quotes former Secretary of State for Communities and Local Government, Eric Pickles, as saying the policy had now been changed. 

Pickles, too, was campaigning to have it reversed.

The 3% ‘additional homes’ surcharge came into effect on 1 April and immediately applied to properties with self-contained apartments within them, as well as to the buy-to-let and second home units that the measure was apparently targeting.

Now it will be the case that any annex that is worth less than one third of the total property value will no longer qualify for the extra charge.

To be liable for the higher rate, annexes must be worth over a third, be capable of being sold separately from the main house, have their own entrance and utility supplies, receive their own council tax demands, and be worth more than £40,000.

In those cases, where a home with an annex does qualify for the stamp duty surcharge, the higher rate applies to the value of the whole property, not just the annex.

Former RICS chairman and north London estate agent Jeremy Leaf says the U-turn stops the government 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?” he asks.

“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. Common sense has prevailed: the government hadn’t thought it through and now it has had a chance to do so, it realises that it simply wouldn’t have worked.”