There have been significant changes to both the SDLT legislation and HMRC’s approach to the application of the rules… | LBLBulletin

Stamp Duty Land Tax – where are we now?

There have been significant changes to both the SDLT legislation and HMRC’s approach to the application of the rules. This can often leave both advisers and taxpayers uncertain as to how a transaction should be treated for SDLT purposes.

For example, the purchase of a £600,000 house with an annex and land could potentially have an SDLT liability of anything between £10,000 to £90,000, depending on the purchaser’s circumstances and the precise nature of the property. 

As well as 3% surcharge issues, two other keys areas of confusion are (i) when do the mixed use (non-residential) rates apply and (ii) when does a transaction involve more than one dwelling. This is considered in more detail below.

Mixed use

The great disparity between the residential and non-residential rates means some purchasers are looking to claim that their property is “mixed use”. Traditionally large areas of land were thought to be more than areas “subsisting for the benefit of the dwelling” and so mixed use rates could be claimed. However, HMRC have hardened their position on this and often state that in the absence of an identifiable commercial use, all land sold with a dwelling will be treated as residential. Therefore you would need to look for evidence of commercial use, such as formal grazing licences or agricultural tenancies, which would prevent the purchaser being able to enjoy the land. It is still unclear whether this applies if the land does not adjoin the dwelling but HMRC have been known to challenge mixed use in some of those cases as well.

Another area which previously caused confusion was where garden land was sold by a householder to a developer. HMRC stated in a note released after a meeting with the Stamp Taxes Practitioners Group in June 2018 that this would be treated as residential (although the 3% surcharge would not apply in the absence of a dwelling), although a subsequent sale by the developer might be treated as non-residential.

Multiple Dwellings Relief (MDR)

MDR is available where more than one dwelling is purchased in a single or linked transactions.  The SDLT is calculated on the average price of each dwelling, then multiplied by the number of dwellings, thus giving access to the lower rate bands for each dwelling. In recent years there has been a surge in retrospective MDR claims, asking for refunds of SDLT. Understandably this has caused HMRC to enquire into many claims to ensure that the relief is genuinely available. In some cases it can be difficult to pin down whether a purchase consists of more than one dwelling and it is not clear which factors are more important to HMRC in determining the position. Some questions raised in HMRC enquiries point relate to the physical characteristics (kitchen and bathroom facilities, separate access and separate utilities), whereas others focus on use (Council tax registration, previous letting. Each case needs to be examined on its own facts.

15% rate for higher value dwellings bought by companies

Finally, although most residential property is likely to be purchased by individuals, where a company is a purchaser there is the potential for the penal 15% flat rate to apply. This rate applies where a company (or a partnership with any corporate partners) buys a “single dwelling interest” for over £500,000 and the company is not eligible for any of the available reliefs. Many purchases are for the purposes of a rental business or for property development and usually these will qualify for relief, although it is always worth getting advice to ensure all the conditions for relief are met. However, there is a nasty pitfall associated with both of these reliefs – if the property is occupied by a “non-qualifying individual” within 3 years of the purchase date then the relief is clawed back and the full 15% rate applies. Such an individual is typically a shareholder of the company or one of their family members. This applies even if there is a genuine commercial reason for occupation or if the individual is paying market rent. HMRC are not known to apply any discretion to such situations and this results in a hefty SDLT bill.

As SDLT is now more complex than ever it is important that purchasers seek advice to ensure they pay the correct amount of SDLT and claim any reliefs they may be entitled to. Please contact Judith Pederzolli at PEM ( for more details.