The overall Stamp Duty Land Tax payable can be legitimately reduced in certain situations, for example:
Mixed-use properties:
A property is considered mixed-use when it encompasses both residential and non-residential elements. Examples of mixed-use transactions could include a retail store with a residential unit on top, or a residential house with accompanying farmland or commercial structures. The specific circumstances will determine how the property is classified, emphasizing the need to thoroughly assess the property being purchased and gather evidence of non-residential usage in anticipation of a potential investigation by HMRC. It is essential to conduct a comprehensive analysis of the situation and maintain proper documentation to support the chosen approach. In some instances, it may be possible to further minimize the liability for Stamp Duty Land Tax (SDLT) by claiming multiple dwellings relief when acquiring a mixed-use property that includes at least two dwellings.
Buying six or more residential properties in a single transaction:
In instances where a minimum of six dwellings are acquired in a single transaction, purchasers have the option to treat these properties collectively as a non-residential transaction. By doing so, the non-residential Stamp Duty Land Tax (SDLT) rates will be applicable, which can be highly advantageous for non-resident company buyers. It is important to note that the non-resident surcharge does not apply to the non-residential rates of SDLT. HMRC has provided clarification that the term “single transaction” pertains to the purchase of six or more individual dwellings under a single contract, even if the acquisition of each dwelling is completed at separate times. While the non-residential rates often result in lower SDLT payments, it is still essential to consider the overall SDLT cost and compare it with the utilization of multiple dwellings relief (outlined below). In most cases, it is recommended to perform both SDLT calculations to determine the most favorable SDLT outcome. This allows the taxpayer to elect the most efficient basis for SDLT payment.
Multiple dwellings relief:
In cases where a company is purchasing multiple properties as part of a single transaction or a series of connected transactions with the same vendor and purchaser, these purchases are classified as either a single transaction or as ‘linked’ SDLT transactions. Consequently, SDLT is calculated based on the total consideration paid for all properties involved. To mitigate the SDLT payable, multiple dwellings relief can be applied, which involves calculating SDLT based on the average price paid per dwelling, multiplied by the number of dwellings, rather than the total consideration. While it is usually evident when a taxpayer acquires multiple dwellings, there are instances, such as when acquiring a house with an annexe, where the determination is less clear due to the approach taken by HMRC in its guidance. Our expertise enables us to help you determine whether treating an annexe as a separate dwelling is reasonable or not.