Are you paying the right amount of SDLT?

Published by Jo White on 30 May 2023

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In England and Northern Ireland, Stamp Duty Land Tax (“SDLT”) is almost always the highest cost associated with purchasing a property.

The type of property you acquire will drive the level of SDLT payable. Whether you own an interest in another property will also have an impact.

As advisors we are being asked more and more as to ways to mitigate the SDLT payable on a property transaction. Whilst this isn’t always possible there are a number of aspects which should at least be considered, even if they are disregarded.

What type of property are you acquiring?

The rates of SDLT are higher for residential property compared to the acquisition of a non-residential property. Where the property being acquired includes a non-residential element then the lower rates of SDLT can be applied.

Assessing what type of property is being acquired is therefore important to ensure you are not overpaying your SDLT liability.

Questions to consider are; has the property been used for another purpose? Are there any non-residential elements to the property? What condition is the residential property in?

The latter point is one which has been challenged most recently in the courts. Where a dwelling is unhabitable then it is not considered a residential property for SDLT purposes. Just because the property isn’t in a state the purchaser would choose to live in doesn’t mean it is unhabitable. HMRC take a strict view on this. Nevertheless an assessment of what is considered habitable can be beneficial to reduce the purchasers overall costs.

Are you acquiring more than one dwelling?

Multiple Dwellings Relief (“MDR”) allows the purchaser to significantly reduce their SDLT liability where the transaction includes the purchase of two or more dwellings. What is considered a dwelling for this purpose has been tested a lot in the courts and therefore we have a clear picture of how a successful claim will look.

If no MDR was claimed initially then it is possible to make an amendment to the original SDLT return up to 12 months after the return was due.

Each property transaction will need to be assessed on its on facts. What may seem it qualifies for reliefs may not due to the make-up of the property or its use.

Whilst there is no guarantee that your SDLT could be reduced without reviewing it, you may be missing out on a tax saving opportunity. Contact us today for more information.

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