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Stamp Duty Land Tax (SDLT)
Making the complex simple
Stamp Duty Land Tax (SDLT) and its Welsh and Scottish equivalents is difficult to navigate and the rules can be very complex. With multiple different types of buyer (individuals, companies, trusts and partnerships) paying varying rates of tax, and constantly changing rules, it is difficult to get it right all of the time.
Whilst many solicitors have a good understanding of SDLT, when it comes to something a little out of the ordinary, they will usually recommend that those buying property seek specialist tax help, and this is where we can help. We help deal with the complexities of SDLT and give you certainty on the amount of SDLT you will pay, working alongside property and real estate lawyers and licensed conveyancers.
Your SDLT liability is payable within 14 days of the effective date of the property transaction, which is usually, (but not always), the completion date, but we recommend contacting us as soon as you have agreed a purchase, as we have seen far too many situations where SDLT has held up purchases, and sometimes even caused them to fall through.
We have set out below, some of the main issues we come across in relation to SDLT, but this is in fact only a very small part of the whole picture.
Multiple dwellings relief (MDR)
MDR works as a relief from SDLT where the property to be purchased consists of two or more residential dwellings, or the substance of the transaction involves the purchase of multiple residential properties from the same or “connected” sellers. In such circumstances, the purchase consideration is averaged between the number of dwellings and therefore results in a lower SDLT liability. In certain circumstances, it may also be possible to claim MDR where the property you are purchasing has an annexe, but the conditions around this are numerous and if you are in any doubt about this you should seek professional help. To add to the complexity where six or more residential properties are acquired as part of the same transaction, a taxpayer may elect to treat the total consideration for all properties concerned to be taxed under the lower commercial rates of SDLT; and it is sometimes necessary to compare both options to see which gives the more favourable result.
Mixed use property
Where a single property is purchased which has a mixture of residential and commercial elements and/or multiple properties are purchased as part of the same transaction, some of which are residential and some of which are commercial, the transaction will likely be mixed and it is possible that lower rates of SDLT will apply. There are a number of ways to approach this and specialist advice should be sought.
Derelict property
Where a residential property is being purchased which is not suitable for use as a dwelling (i.e not habitable), it may be possible to argue that higher rates of SDLT, including where applicable the 3% surcharge, do not apply such that lower rates of SDLT will be payable. If you are planning to purchase a derelict property or have already done so and you are unsure of your SDLT liability please do contact us.
Buying property as a partnership, company or trust
Transfers into and out of partnerships are subject to special SDLT rules and can result in a significant reduction to the potential SDLT liability. These rules are complex and rely on expert guidance in order to determine availability.
Buying property as a company or trust is less complex, but there are specific considerations to bear in mind and it may still be sensible to seek specific guidance.
Leasehold properties
SDLT on leasehold properties can be extremely complex, and many of the online calculators cannot cope with such transactions, such that they require bespoke practical advice. The amount of SDLT you pay depends on whether it is a new lease, an existing lease which has been assigned. It will also depend on whether or not there is a premium as well as rent, and the specific terms of the lease. There are so many variables that it can be mind boggling, particularly where multiple leases are involved.
SDLT reliefs
On the plus side, whilst SDLT can be very complex, there are a number of SDLT reliefs which may be available to reduce your SDLT liability. We have already mentioned one of those (MDR), but the list is long and includes replacement of main residence relief (which is seen quite often but can at times be complex), group relief, reconstruction relief, charities relief, sub-sale relief, sale and leaseback relief, overlap relief, and many others. If you think you may be eligible for some form of relief but are unclear we would be happy to advise you.