Stamp Duty Changes Ahead For Multiple And Mixed-use Purchases

By Author: Grant Saw Solicitors LLP
Total Articles: 22
Comment this article

In England, Stamp Duty Land Tax (SDLT) is paid on residential property transactions if the market value is more than £125,000 with a tiered scale based on the purchase price. If a first-time buyer, is to buy an additional home or a buy-to-let property, different rules apply if it is through a company or a resident overseas. Non-residential property transactions will be subjected to different rates that are currently lower than residential rates.

At this time, transactions that are not wholly in residential property need to pay 12% less stamp duty. Property buyers who are looking to pay reduced stamp duty rates when purchasing multiple residential properties or claim mixed residential and non-residence should prepare themselves for stricter rules.

The mixed-use rule is applied to the purchase of a single building that has both commercial and residential use such as retail at ground level and flats above, and the purchase of a mixed portfolio of an exclusive residential and commercial property.

It also applies, though, to the purchase of a dwelling with land that is not ‘grounds’ of the dwelling, as well ...
... as the purchase of a dwelling with land which is not residential property despite its relationship with the dwelling. Over the past few years, these two possibilities have been exploited.
The government is considering replacing the hard-edged rule with a distribution rule, which means a portion of the tax that would be due on the total price at the residential rates is added to a portion of the tax due on the total price at the non-residential rates.

Consultation by Her Majesty’s Revenue and Customs (HMRC) highlighted how tax is calculated in two key transaction areas: the Multiple Dwelling Relief (MDR) rules and those that involve the mixed-use purchases of residential and non-residential property.

At this time, MDR can be claimed when two properties are purchased under one transaction or through a series of linked transactions with the same purchase and vendor. The SDLT is calculated based on the average value of each dwelling, calculated individually, and added together, rather than on a combined value. An example would be the calculation of stamp duty on a single transaction over three properties would be more costly than a calculation over three individual properties, which can save a large amount of cost as stamp duties are tiered according to the value of the property.

When claiming for mixed-use properties that are subject to SDLT at a lower non-residential rate, savings can be made even if the amount of non-residential land in the purchase is small. HMRC notes that mixed-property purchases range from a country house with land let for grazing to fast food shops with flats above, pubs and Bed and Breakfasts, to larger-scale city centre developments that comprise ground floor retailers with floors of flats above.
Mixed-property purchases are deemed as non-residential and benefit from lower non-residential SDLT rates, and purchasers can avoid the surcharges that come with an already individually owned residential property or one that is living overseas.

For the sole purpose of SDLT, the definition of ‘dwelling’ and deciding if it qualifies HMRC will take into consideration the number of indicators such as a separate council tax bill, energy supply or lockable front door, including the fundamental facilities needed to live daily.

Due to upcoming possible changes, purchasers may be able to claim relief. Stamp duty was implemented on the tax charges on the residential and non-residential properties were similar and there were no tax advantages, however over time the difference between property values grew, resulting in a higher rate where additional dwelling rates are applied.

About Us:

Grant Saw Solicitors in London were established in 1851 with offices in Greenwich and Blackheath, offering a variety of legal services to individuals and businesses. They received recognition for excellence in industry standards and are proud owners of numerous awards and accreditations including Lexcel, the Conveyancing Quality Scheme (CQS), the Law Society’s family law accreditation and the Wills and Inheritance Quality Scheme (WIQS). In 2013, they received the global ISO 9001 standard, recognising firms that determine excellence. As members of LawNet, a national network of law firms, they provide advice, ideas and resources. With their friendly and modern approach combined with traditional excellence, they provide superior services to their clients. Visit, https://grantsaw.com/.