Stop charging property stocks as purchases when a household buys its home

changelog.d/2238.fixed.md

@@ -0,0 +1 @@
+Stop charging a household's whole stock of other residential and non-residential property as a purchase whenever it buys its main residence. `property_purchased` now sets only the main-residence purchase; `additional_residential_property_purchased` (the price of one additional dwelling, charged at the higher rates for additional dwellings) and `non_residential_property_purchased` are inputs, nil unless set directly or imputed by a dataset, and are uprated like the property stocks when a dataset supplies them.

policyengine_uk/data/uprating_indices.yaml

@@ -107,6 +107,9 @@ gov.economic_assumptions.yoy_growth.obr.per_capita.gdp:
 - non_residential_property_value
 - other_investment_income
 - other_residential_property_value
+# Purchase prices a dataset may impute; uprated like the property stocks.
+- additional_residential_property_purchased
+- non_residential_property_purchased
 - owned_land
 # A formula of benunit_reported_capital; listed so a dataset that stores it
 # directly is uprated like the input.

policyengine_uk/tests/policy/baseline/gov/hmrc/stamp_duty/property_purchased_default.yaml

@@ -6,3 +6,49 @@
     property_purchased: false
     main_residential_property_purchased: 0
     stamp_duty_land_tax: 0
+
+# Issue #2238 reproducer: one adult, £80,000 earnings, London, a £600,000 main
+# residence and £2,000,000 of other residential property. Before the fix a
+# main-residence purchase charged the whole other-property stock as one
+# additional-dwelling purchase (£233,750 of stamp duty).
+- name: Issue 2238 - no purchase, no stamp duty
+  period: 2025
+  input:
+    employment_income: 80_000
+    region: LONDON
+    main_residence_value: 600_000
+    other_residential_property_value: 2_000_000
+    property_purchased: false
+  output:
+    additional_residential_property_purchased: 0
+    stamp_duty_land_tax: 0
+
+- name: Issue 2238 - buying the main residence does not charge the other-property stock
+  period: 2025
+  input:
+    employment_income: 80_000
+    region: LONDON
+    main_residence_value: 600_000
+    other_residential_property_value: 2_000_000
+    non_residential_property_value: 500_000
+    property_purchased: true
+  output:
+    main_residential_property_purchased: 600_000
+    additional_residential_property_purchased: 0
+    non_residential_property_purchased: 0
+    # Main rates from 1 April 2025: 2% of 125,000 to 250,000, 5% above.
+    stamp_duty_land_tax: 0.02 * 125_000 + 0.05 * 350_000
+
+- name: Issue 2238 - an additional-dwelling purchase is charged on its own price
+  period: 2022
+  input:
+    employment_income: 80_000
+    region: LONDON
+    main_residence_value: 600_000
+    other_residential_property_value: 2_000_000
+    property_purchased: true
+    additional_residential_property_purchased: 400_000
+  output:
+    # Main residence as above; the £400,000 additional dwelling at the higher
+    # rates in force on 30 April 2022: 3% to 125,000, 5% to 250,000, 8% above.
+    stamp_duty_land_tax: (0.02 * 125_000 + 0.05 * 350_000) + (0.03 * 125_000 + 0.05 * 125_000 + 0.08 * 150_000)

policyengine_uk/tests/test_property_transaction_tax_purchase_properties.py

@@ -0,0 +1,186 @@
+"""Property-based tests for the purchases that property transaction taxes
+are charged on (issue #2238).
+
+Stamp Duty Land Tax, Land and Buildings Transaction Tax and Land Transaction
+Tax are charged on a purchase's price. A household's stocks of other
+residential and non-residential property are not purchases:
+property_purchased sets only the main-residence purchase, and an
+additional-dwelling or non-residential purchase is its own input. The
+additional-dwelling input is a purchase already classified as a higher-rates
+transaction: a new main home bought while keeping another dwelling, with no
+replacement of a main residence, belongs there rather than in the
+main-residence price (Finance Act 2003 Schedule 4ZA).
+
+Invariants, for any generated population of households across the four
+nations, with or without a main-residence purchase:
+
+1. Stocks are not purchases: zeroing a household's other residential and
+   non-residential property never changes any transaction tax.
+2. The main-residence flag alone never creates an additional-dwelling
+   purchase: with that input unset, SDLT on residential property is the
+   main-rates tax on the main-residence price.
+3. An additional-dwelling purchase is charged on its own price at the higher
+   rates (nil below the £40,000 minimum), on top of the main-residence tax,
+   and the higher rates are never below the main rates.
+4. Monotone: SDLT never falls as the additional-dwelling price rises.
+"""
+
+import numpy as np
+from hypothesis import HealthCheck, given, settings
+from hypothesis import strategies as st
+
+from policyengine_uk import Simulation
+
+PROPERTY_SETTINGS = settings(
+    max_examples=10,
+    deadline=None,
+    derandomize=True,
+    suppress_health_check=[HealthCheck.too_slow, HealthCheck.data_too_large],
+)
+YEARS = [2022, 2024, 2025, 2027]
+REGIONS = ["LONDON", "NORTH_WEST", "NORTHERN_IRELAND", "SCOTLAND", "WALES"]
+TAXES = [
+    "stamp_duty_land_tax",
+    "land_and_buildings_transaction_tax",
+    "land_transaction_tax",
+    "expected_sdlt",
+    "expected_lbtt",
+    "expected_ltt",
+]
+TOLERANCE = 0.01
+
+household_strategy = st.fixed_dictionaries(
+    {
+        "region": st.sampled_from(REGIONS),
+        "main_residence_value": st.integers(0, 3_000_000),
+        "other_residential_property_value": st.integers(0, 5_000_000),
+        "non_residential_property_value": st.integers(0, 2_000_000),
+        "property_purchased": st.booleans(),
+        "main_residential_property_purchased_is_first_home": st.booleans(),
+        "additional_residential_property_purchased": st.integers(0, 3_000_000),
+    }
+)
+population_strategy = st.lists(household_strategy, min_size=4, max_size=12)
+
+
+def _situation(households, year):
+    situation = {"people": {}, "benunits": {}, "households": {}}
+    for i, household in enumerate(households):
+        person = f"p{i}"
+        situation["people"][person] = {"age": {year: 40}}
+        situation["benunits"][f"b{i}"] = {"members": [person]}
+        situation["households"][f"h{i}"] = {
+            "members": [person],
+            **{key: {year: value} for key, value in household.items()},
+        }
+    return situation
+
+
+def _calc(households, year, variables):
+    sim = Simulation(situation=_situation(households, year))
+    return sim, {v: np.array(sim.calculate(v, year), dtype=float) for v in variables}
+
+
+@PROPERTY_SETTINGS
+@given(population_strategy, st.sampled_from(YEARS))
+def test_property_stocks_are_never_purchases(households, year):
+    _, with_stocks = _calc(households, year, TAXES)
+    without = [
+        {
+            **h,
+            "other_residential_property_value": 0,
+            "non_residential_property_value": 0,
+        }
+        for h in households
+    ]
+    _, without_stocks = _calc(without, year, TAXES)
+    for tax in TAXES:
+        assert np.allclose(with_stocks[tax], without_stocks[tax], atol=TOLERANCE)
+
+
+@PROPERTY_SETTINGS
+@given(population_strategy, st.sampled_from(YEARS))
+def test_main_residence_flag_never_creates_an_additional_purchase(households, year):
+    # Leave the additional-dwelling purchase unset, so a main-residence
+    # purchase alone decides it.
+    households = [
+        {k: v for k, v in h.items() if k != "additional_residential_property_purchased"}
+        for h in households
+    ]
+    sim, out = _calc(
+        households,
+        year,
+        [
+            "sdlt_on_residential_property_transactions",
+            "main_residential_property_purchased",
+            "additional_residential_property_purchased",
+        ],
+    )
+    stamp_duty = sim.tax_benefit_system.parameters(year).gov.hmrc.stamp_duty
+    main = stamp_duty.residential.purchase.main
+    price = out["main_residential_property_purchased"]
+    first_home = np.array(
+        [h["main_residential_property_purchased_is_first_home"] for h in households]
+    ) & (price < main.first.max)
+    main_rates_tax = np.where(
+        first_home, main.first.rate.calc(price), main.subsequent.calc(price)
+    )
+    assert np.all(out["additional_residential_property_purchased"] == 0)
+    assert np.allclose(
+        out["sdlt_on_residential_property_transactions"],
+        main_rates_tax,
+        atol=TOLERANCE,
+    )
+
+
+@PROPERTY_SETTINGS
+@given(population_strategy, st.sampled_from(YEARS))
+def test_additional_purchase_is_charged_on_its_own_price(households, year):
+    sim, with_purchase = _calc(
+        households, year, ["sdlt_on_residential_property_transactions"]
+    )
+    no_purchase = [
+        {**h, "additional_residential_property_purchased": 0} for h in households
+    ]
+    _, without_purchase = _calc(
+        no_purchase, year, ["sdlt_on_residential_property_transactions"]
+    )
+    purchase = sim.tax_benefit_system.parameters(year).gov.hmrc.stamp_duty.residential
+    price = np.array(
+        [h["additional_residential_property_purchased"] for h in households],
+        dtype=float,
+    )
+    chargeable = np.where(price < purchase.purchase.additional.min, 0, price)
+    higher_rates_tax = purchase.purchase.additional.rate.calc(chargeable)
+    extra = (
+        with_purchase["sdlt_on_residential_property_transactions"]
+        - without_purchase["sdlt_on_residential_property_transactions"]
+    )
+    assert np.allclose(extra, higher_rates_tax, atol=TOLERANCE)
+    # The higher rates are never below the main rates on the same price.
+    assert np.all(
+        higher_rates_tax
+        >= purchase.purchase.main.subsequent.calc(chargeable) - TOLERANCE
+    )
+
+
+@PROPERTY_SETTINGS
+@given(population_strategy, st.sampled_from(YEARS), st.integers(1, 1_000_000))
+def test_stamp_duty_never_falls_as_the_additional_price_rises(
+    households, year, increase
+):
+    _, before = _calc(households, year, ["stamp_duty_land_tax"])
+    higher = [
+        {
+            **h,
+            "additional_residential_property_purchased": h[
+                "additional_residential_property_purchased"
+            ]
+            + increase,
+        }
+        for h in households
+    ]
+    _, after = _calc(higher, year, ["stamp_duty_land_tax"])
+    assert np.all(
+        after["stamp_duty_land_tax"] >= before["stamp_duty_land_tax"] - TOLERANCE
+    )

policyengine_uk/variables/household/consumption/additional_residential_property_purchased.py

@@ -3,15 +3,22 @@
 
 class additional_residential_property_purchased(Variable):
     label = "Residential property bought (additional)"
-    documentation = "The price paid for the purchase of a residential property in the year, for use as a second home or another non-main-residence purpose. Only include the value of a single purchase."
+    documentation = (
+        "The price paid for a single residential property bought in the year "
+        "that is not a replacement of the household's main residence, such as "
+        "a second home or a property to let, so that the higher rates for "
+        "additional dwellings apply (Finance Act 2003 Schedule 4ZA). Only "
+        "include the value of a single purchase. A main-residence purchase "
+        "(property_purchased) does not imply one: the household's stock of "
+        "other residential property (other_residential_property_value) is not "
+        "a purchase, so this is nil unless set directly or by a dataset that "
+        "imputes additional-dwelling purchases."
+    )
     entity = Household
     definition_period = YEAR
     value_type = float
     unit = GBP
-
-    def formula(household, period):
-        property_purchased = household("property_purchased", period)
-        other_residential_property_value = household(
-            "other_residential_property_value", period
-        )
-        return other_residential_property_value * property_purchased
+    reference = dict(
+        title="Finance Act 2003 Schedule 4ZA",
+        href="https://www.legislation.gov.uk/ukpga/2003/14/schedule/4ZA",
+    )

policyengine_uk/variables/household/consumption/non_residential_property_purchased.py

@@ -3,10 +3,15 @@
 
 class non_residential_property_purchased(Variable):
     label = "Non-residential property bought"
-    documentation = "The price paid for the purchase of a non-residential property in the year. Only include the value of a single purchase."
+    documentation = (
+        "The price paid for the purchase of a non-residential property in the "
+        "year. Only include the value of a single purchase. A main-residence "
+        "purchase (property_purchased) does not imply one: the household's "
+        "stock of non-residential property (non_residential_property_value) is "
+        "not a purchase, so this is nil unless set directly or by a dataset "
+        "that imputes non-residential purchases."
+    )
     entity = Household
     definition_period = YEAR
     value_type = float
     unit = GBP
-    defined_for = "property_purchased"
-    adds = ["non_residential_property_value"]

policyengine_uk/variables/input/consumption/property/property_purchased.py

@@ -2,17 +2,24 @@
 
 
 class property_purchased(Variable):
-    label = "All property bought this year"
-    documentation = "Whether all property wealth was bought this year"
+    label = "Main residence bought this year"
+    documentation = (
+        "Whether the household bought its main residence this year. It sets "
+        "the main-residence purchase price (main_residential_property_purchased) "
+        "only. Purchases of additional dwellings and of non-residential "
+        "property are separate inputs, so a main-residence purchase never "
+        "charges the higher rates for additional dwellings on the household's "
+        "other property."
+    )
     entity = Household
     definition_period = YEAR
     value_type = bool
-    # Fail-safe default: a household has NOT bought all its property this year.
+    # Fail-safe default: a household has NOT bought its home this year.
     # main_residential_property_purchased is computed as
     # main_residence_value * property_purchased, so a True default charges
-    # every household stamp duty on its full property wealth (~£370bn of
-    # phantom SDLT). Population datasets set this explicitly for the small
-    # share of genuine purchasers; the household calculator and tests set
-    # main_residential_property_purchased directly. False is the correct
-    # neutral default for any household where it is not set.
+    # every household stamp duty on its full main residence value. Population
+    # datasets set this explicitly for the small share of genuine purchasers;
+    # the household calculator and tests set main_residential_property_purchased
+    # directly. False is the correct neutral default for any household where it
+    # is not set.
     default_value = False