Stamp Duty Land Tax

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13 June 2011

The new 5% SDLT rate on residential properties with a purchase price of over £1 million came into force on 6 April 2011.  The rate only applies where the property concerned is wholly residential, and if there is partial residential use, there is no apportionment of the value between different uses.

With at least £10,000 riding on the outcome (even if the property just creeps over the £1 million mark) it is well worth establishing whether the property you are buying might escape the additional rate. 

  • a farm sale will not be "wholly residential" so will fall within the 4% band. However, if there is no farm but only a parkland area around a large house, that might count as "garden and grounds" used chiefly for ornament or recreation, in which case all would be residential.
  • hotels, care institutions and halls of residence are specifically not residential. 
  • where there is, for instance, a single building with different uses within it (such as the use of two rooms for a dentist surgery and waiting room) it may that be the building as a whole is taken to be "suitable" for residential and it could therefore fall within the 5% band.  Nevertheless, there is scope for claiming that houses with a significant business element such as some bed and breakfast accommodation might be considered non-residential.

Buyers should, however, be wary of claiming for more then they can justify.  Cases may be reopened by HRMC (up to 21 years after the event if there is fraud or negligence) and if the higher rate is found to be chargeable, interest and, in appropriate cases, penalties will be payable on top. 

For further information on these points, please contact Alastair Morrison on (0117) 939 2258 or email alastair.morrison@burges-salmon.com

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