The SDLT return and payment is an extremely important element of a property transaction and there are a number of common errors we see that could be avoided.
First Time Buyers Relief
A purchaser inherited a share in a property but never lived in it so will FTBR will be available?
No – to qualify as a First Time Buyer, a purchaser must never have owned or had an interest in a property anywhere in the world and whether or not they lived in the property is irrelevant.
Will a joint purchase of a property where one buyer is a first time buyer qualify for the relief?
No – all purchasers must be first time buyers for the relief to apply.
A purchaser owns a non-residential property so will they qualify for FTBR?
Yes – owning non-residential property will not prevent a claim for FTBR provided the property does not contain any dwellings.
Will FTBR will apply if a first time buyer intends to rent out the property they are purchasing?
No – the purchaser must intend to live in the property to qualify for FTBR.
Higher Rate
Does the higher rate only apply if the purchaser owns another property?
No – the higher rate can also apply to a purchase consisting of more than one dwelling in a single transaction or a linked transaction and it is important to ascertain how many dwellings are being purchased and whether any of the dwellings are subsidiary dwellings.
If a purchaser is buying a new property following divorce but he still owns a share of the family home will higher rate will apply?
No – if there has been a financial order within divorce proceedings specifying that the former matrimonial home will remain in joint names the higher rate will not apply to the new purchase.
A husband and wife are selling their previous main residence to buy a new one but the wife owns a buy to let property so will the higher rate will apply?
No – the sale of the previous main residence means that the new property is a replacement of the previous main residence so the buy to let property will be ignored and the higher rate will not apply.
A purchaser is buying a property in their sole name after living in rented accommodation, their spouse has a buy to let property which will not be sold. The purchaser owns no other property so will the higher rate apply?
Yes – because the purchaser’s spouse has an additional property the transaction will be treated as though both spouses were purchasers and the higher rate will apply.
A purchase consists of a dwelling and a shop, the property is not a replacement of a main dwelling so will the higher rate apply.
No – the higher rate only applies to the residential rate of SDLT. This would be a mixed use transaction meaning that the non-residential rate is applicable and the higher rate would not therefore be relevant.
Purchasing 6 dwellings or more
Now MDR is no longer available so does it makes any difference how many dwellings are being purchased?
Yes – a purchaser can elect to pay the non-residential rate of SDLT if they are purchasing 6 or more dwellings in a single transaction or a linked transaction. It will be important to assess whether the dwellings will meet HMRC’s criteria to be considered a dwelling before applying the non-residential rate of SDLT.
Non UK Resident Purchaser
A husband and wife are purchasing a residential property in the UK, the husband has not lived in the UK for more than 183 days in the year preceding the purchase but his wife has so will the non-resident surcharge will apply?
No – if the wife has lived in the UK for more than 183 days in the 12 months preceding the purchase the purchasers will be deemed resident and the surcharge will not apply.
Mixed Use Property
A purchaser is buying a property which consists of 3 flats and a small commercial unit on the ground floor. Will the residential rate of SDLT apply as the purchase includes separate dwellings?
No – this could be considered a mixed use transaction meaning that the non-residential rate of SDLT will apply. Not only should this result in a lower amount of SDLT but will also mean that the higher rate of SDLT is not applicable.
A purchaser is buying a 3 storey property and the lower ground floor was used by the sellers for their business. Will the non-residential rate of SDLT will apply?
No – not necessarily. It will depend on the property itself and whether the lower ground floor could be considered suitable for use as a dwelling. If the lower ground floor is subject to adaptations, i.e. machinery or specialist equipment which mean it could never be considered part of the dwelling the non-residential rate should apply. However, if the lower ground floor is merely a room or area used for a business but could just as easily be used as a room or area of the main dwelling, it will be residential – See Andrei Tretyakov v HMRC TC/2023/16164
A purchase of a residential property includes land which is separated from the main house by a road, is not visible from the house and is used by the public. Will this will be considered garden and grounds meaning the residential rate of SDLT should be paid?
No – if the land is separate to the dwelling, does not support or provide any benefit (including visual benefit) to the dwelling and is used by members of the public it would fall outside the definition of garden and grounds meaning that the purchase is subject to the non-residential rate of SDLT – See Guerlain Desai v HMRC TC/2022/13097
These are just some of the areas that cause confusion but there are many more and some transactions are far more complex meaning that specialist SDLT advice is something you and your clients should consider.
Get in touch with Relatus today to see how we can help.
