SDLT and mixed-use properties

Stamp duty land tax (SDLT) applies where a property in England or Northern Ireland is sold for valuable consideration. There are different rates for residential properties and non-residential properties. Non-residential properties include:

·       commercial property;

·       property that is not suitable to be lived in and cannot be made suitable (for example, where there is a high risk that the property will collapse);

·       forests;

·       agricultural land that is part of a working farm or used for agricultural reasons;

·       any other land or property that is not part of a dwelling house or garden; and

·       six or more residential properties purchased in a single transaction.

A property may comprise both residential and non-residential elements. This would be the case, for example, for a shop with a flat above it. Where a mixed-use property is purchased, it is not necessary to value the different parts and apply the residential and non-residential rates accordingly. Instead, the non-residential rates apply to the whole purchase. This can be beneficial as the non-residential rates are considerably lower. Further, there is no second-property supplement.

The residential and non-residential rates are shown in the tables below.

Residential rates

Consideration	SDLT rate
Up to £125,000	Zero
The next £125,000 (the portion from £125,001 to £250,000)	2%
The next £675,000 (the portion from £250,001 to £925,000)	5%
The next £575,000 (the portion from £925,001 to £1.5 million)	10%
The remaining consideration above £1.5 million	12%

A supplement of 5% applies to second and subsequent homes where the consideration is £40,000 or above (other than an exchange of the main residence).

Non-residential rates

Consideration	SDLT rate
Up to £150,000	Zero
The next £100,000 (the portion from £150,001 to £250,000)	2%
The remaining consideration above £250,000	5%

Case study

Bill and Jane buy an equestrian property comprising a house, stables and paddocks of three acres from which they run their business providing riding lessons and liveries. The property cost £1.2 million. As the equine facilities are used commercially, the property is a mixed-use property and the commercial SDLT rates apply. Therefore, SDLT of £49,500 is payable.

Had they not used the equine facilities commercially, HMRC would treat the property as a residential property. Assuming that it is their main residence, the SDLT payable at the residential rates would be £63,750 – £14,250 more than for a mixed-use property costing the same.

Partner note: FA 2003, s. 55.

Disclaimer

This article is not intended to be tax advice. Each person's tax circumstances are different; therefore, we recommend that you contact us for personalized tax advice. Sam Niranjan & Co., or Sivasambu Candesamy Niranjan, will not accept any responsibility whatsoever if you make any loss as a result of relying on this article.