Does the 3% SDLT surcharge apply where the property being acquired is not entirely residential?
3% Additional Rate, Dwelling, Mixed Use, Residential Property
“I have a client who is purchasing a property which technically I think will be mixed use, as there is a derelict house on part of the land which is still technically residential and then quite a lot of forestry and agricultural land. My client wishes to purchase in the name of herself and her three daughters. Her three daughters will live with her at the property initially, but they are now of an age when they are likely to want to purchase their own properties in the near future. My client asks whether because this is a mixed use property they will in anyway be able to evade paying a penalty when they purchase a property of their own. If not, should the property be put in to a Trust. I am mindful of the fact that as I say they will be living at the property as their main residence until such time as they buy their own properties.”
The 3% surcharge applies only where the interest acquired consists entirely of residential property.
‘Residential property’ means a building that is used as a dwelling, or suitable for use as a dwelling, or in the process of being constructed or adapted for such use, and includes land that is or forms part of the garden or grounds of that building (including any building or structure on such land) (section 116(1) FA 2003). Here you have property which is not entirely residential so the rates in Table B of section 55 will apply.
At the time of publication this response was correct however as tax legislation and practice change from time-to-time you should take specific advice before taking any action.
“I have a further question arising out of the answer to the second point. What I was trying to get at was if my client who owns a share in the mixed property subsequently acquires a wholly residential property as a ‘first time buyer’ on her own, will the ownership of the share in the mixed property mean she pays the surcharge on her new purchase, because mixed involves residential property?”
Source: BLG Member
Each owner will have an interest in the dwelling for the purposes of the 3% surcharge. Although there is an argument that the interests of co-owners are not ‘major’ interests for the purposes of the 3% SDLT surcharge HMRC take the view that they are and, on this basis, were any of them to acquire an additional dwelling the surcharge would apply.
Where there is a bare trust of a major interest in a dwelling the beneficiaries are treated as holding the interest jointly for SDLT purposes so this would not affect the position. Use of a trust (other than a bare trust) would only help if either the mother and daughters (assuming they are over 18) were not beneficiaries under the settlement or, if they were, were not entitled either to occupy the dwelling for life or to income earned in respect of the dwelling.
At the time of publication this response was correct however as tax legislation and practice change from time-to-time you should take specific advice before taking any action.
Please refer to Ann’s free SDLT resource if you require further stamp duty land tax assistance. This resource covers a wide range of SDLT topics and using the available tags you can find a specific query.
To be notified when new Q&As are published please sign up for alerts here.