Higher Rate SDLT

The most recent changes to SDLT involves higher rate of tax payable in certain circumstances on residential use of properties.  Please note that these regulations do not apply to properties which are classified as non residential or as mixed use (i.e. which include both residential and non residential elements).  The rules on the treatment of SDLT are complex and will vary on a case by case basis, and is beyond the scope of this note to provide an in-depth analysis of the general law relating to SDLT.  There are, however, two principal regimes to note in relation to the additional payment of SDLT for residential properties.

The first of these is the 15% higher residential rate. Purchase of a residential property is taxed at 15% of the total consideration where that consideration exceeds £500,000 (with effect from 20 March 2014) and where the buyer is or includes a company or other non natural person and where it comprises a single dwelling. There are various exceptions and exemptions to the rules, however, any property which fits the above description should be treated as being taxed at the highest rate unless such an exemption can be shown.

Please note also that where there is a dwelling which would fall within the 15% band on its own, but which forms part of a larger transaction (such as one which would overall qualify as mixed use), two transaction returns must be made to HMRC, one for the residential unit which would be taxed at 15% with the value attributable to that property taxed at 15%, and one for the remainder of the property at whatever rates are applicable to that area.  This is the case even where the residential element does not form a distinct part of the transaction.

It should also be noted that where a company or non natural person owns a high value residential dwelling (with a value of more than £500,000) there is also an annual tax on enveloped dwellings (ATED) payable annually by the company. The provisions relating to these rules are complex and advise should be sought if it is possible that ATED will apply to your purchase.

The second regime is the 3% surcharge for additional dwellings. This will be covered in a separate note.