Stamp Duty Land Tax has become a significant cost to higher value property purchases since the SDLT rules were first changed in 2014, followed by the additional 3% surcharge for second homes in 2016 and another 2% surcharge for non-UK residents introduced in 2021.
Over the last few years, additional focus has also therefore been on the available SDLT Reliefs that can help reduce this cost.
Multiple Dwellings Relief
Multiple Dwellings Relief (MDR) was introduced in 2011 to assist large property portfolios to change hands without incurring the higher rates of SDLT and broadly applies so that, where more than one property is being acquired, the SDLT can be calculated using the average value rather than just being applied to the total value, which typically reduces the SDLT.
However, a perhaps unintended consequence is that MDR can also be used to reduce SDLT on a purchase of your main home if it has an annex or subsidiary dwelling, which represents less than 1/3 of the total value.
Mixed-use property
Another SDLT saving can be achieved where property with residential and non-residential use is acquired. The current SDLT rules operate such that where “mixed use” property is acquired, the rates of SDLT that apply are the typically lower, non-residential rates.
Examples of mixed-use property may be a property that has a shop with a flat above, or a portfolio of mixed commercial and residential properties.
But a flurry of SDLT claims have also been made for large homes that have, for example, adjoining farmland, paddocks, footpaths, or even underground railway ventilation shafts.
HMRC have been vigorously challenging both claims for MDR and what qualifies as a mixed-use property through the courts, largely successfully.
As well as taking cases to Tribunal, HMRC responded to the increased amount of SDLT claims by issuing a consultation document in 2021 to change both the application of MDR and mixed-use rules, such that the ability to use these would likely be limited.
While the consultation closed in February 2022, HMRC have yet to comment on how they may respond to the consultation responses and take forward the proposed changes.
Although HMRC have stayed silent so far, they may take the opportunity in the Budget on 6 March to announce or bring in changes to SDLT. So, where a purchaser can, it may be prudent to complete any purchases before 6 March 2024.
Keeping you up to date
BHP’s Property Tax Team will be keenly reviewing the details announced on Budget Day so stay tuned to our socials to hear updates regarding SDLT. You can also register for our post-Budget seminar on 7 March to hear all the changes summarised by Chris Humphreys.
Zoe Roberts, Tax Partner within our Property Team, commented: “What is likely, whether the rules change or not, is that SDLT will continue to be a significant cost for any property purchase, whether for investment or as a home, and advice should be taken to make sure that you’re making the most of any available reliefs.”
BHP has a team of SDLT and Property Tax specialists who can help advise you on your SDLT liability. Get in touch if you have any questions.
