A response to 'Additional SDLT and the mixed property'
By
Sean Randall further clarifies the new and complex rules on higher rates of SDLT and additional dwelling supplement for LBTT on purchases by individuals and companies
This short article responds an earlier article authored by Julie Butler, and published in Solicitors Journal, by making a number of important corrections. It does not summarise the rules generally.
For convenience, references to ‘surcharge’ are to the stamp duty land tax (SDLT) higher rates and references to ‘supplement’ are to the land and buildings transaction tax (LBTT) additional dwelling supplement. References to paragraphs are to Butler’s article.
• First para: The surcharge does not apply to all purchases of dwellings by companies, etc. It does not apply to the purchase of more than five dwellings in a single transaction or to the purchase of ‘mixed’ (residential and non-residential) property in a single or in linked transactions.
• Third para under ‘SDLT rates’: It is not necessary for purchases of mixed property to be under one contract to escape the surcharge. Purchases of mixed property under linked transactions also qualify.
• Fourth para under ‘SDLT rates’: A slab system does not apply to commercial property purchases. A slice system applies. The 0 per cent, 2 per cent and 5 per cent rates apply to so much of the price as falls within each tax band. References in the article to the mixed rate at 5 per cent should read a marginal rate of up to 5 per cent.
• First para under ‘Farming community’: RMRR does not apply to relieve one dwelling purchased in a multiple dwelling transaction. There is no concept of partial RMRR relief.
• First para under ‘Replacement properties’: Individuals who do not own another dwelling on the completion day may pay the surcharge. They may be deemed to own a dwelling owned by their spouse, civil partner, or child.
• Third and Fourth paras under ‘Replacement properties’: RMRR does not use an 18-month period for purchasing a replacement of a main residence. It uses a three-year period. And that three-year time period commenced from 25 November 2015. This is an important transitional provision, as it allows those who sold their old main residence before 26 November 2015 until 26 November 2018 to buy a replacement.
• First para under ‘Main residence’: Co-habitees are treated as one unit for the purposes of the supplement.
• Second para under ‘Main residence’: It is not correct to say that only interests in dwellings worth £40,000 or less do not count for the purpose of the surcharge. Interests subject to a lease that has more than 21 years to run, leases for an original term of seven years or less, and dwellings let to students also do not count.
• Third para under ‘Main residence’: An amendment to the Finance Bill 2016 (now Finance Act 2016) for granny annexes was made in July 2016.
Sean Randall is head of stamp taxes at KPMG, a fellow of the Chartered Institute of Taxation, and editor and author of Sergeant & Sims on Stamp Taxes | @KPMG