What is the rate of SDLT on the purchase of a house and adjoining building plot?
“I have clients who purchased a property at auction. The property consists of a house subject to an AST with an adjoining building plot which has planning permission for a house. The clients wish to purchase the house in their personal names and the building plot in a company name; they are directors of the company.
I am unsure how this is to be treated for SDLT purposes. Are they entirely separate transactions, in which case the house is to be taxed at residential rate with the second property 3% supplement, and the plot will be free of tax being under the threshold (the value of the plot is £80,000).
Alternatively, are they linked transactions as they are under one contract with the same seller and possible linked buyers. If so, is it a residential property or mixed use as the plot is not regarded as residential. Also, if they are linked, is the buyer regarded as the individuals or the company.
As you can see there are number of different interpretations which would each give a different outcome for the tax payable.”
Source: BLG Member
You say ‘purchased’ at auction. Does this mean that there is now going to be a sub-sale of part to the company? If so, the pre-completion transactions rules could apply as could the market value rule in section 53 FA 2003.
On a straightforward sale of the house to your clients and the building plot to their company the position will be as follows:
(1) The transactions are linked as they ‘form part of a single scheme, arrangement or series of transactions’ between the same vendor and the same purchaser, or, in either case, persons connected with them (section 108(1) FA 2003). The company will be connected with the clients as they will control it. In my view it is one bargain which is being split into two.
(2) The tax payable is determined using the rates for non-residential property in Table B and applying those rates to the total consideration. The result is apportioned between the transactions in proportion to their share of the total chargeable consideration.
If both transactions have the same effective date a single SDLT1 can be filed and all the buyers (the individuals and the company) will need to sign it as they will be treated as buying jointly. If preferred, two land transaction returns can be filed.
The 3% surcharge will not apply to the purchase of the house because the property which is the subject of the linked transactions is not wholly residential.
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.
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