HMRC’s published guidance on the application of the 3% higher rate of Stamp Duty Land Tax (SDLT) has been updated. The higher rates of SDLT were introduced on 1 April 2016 and apply to purchases of additional residential property such as buy to let and second homes.
At the time the new higher rates were introduced, HMRC confirmed that where there was a purchase of mixed use buildings consisting of residential and non-residential properties that the 3% higher rate of SDLT applied to the dwelling element.
HMRC’s guidance on this issue was updated on 13 November 2020. The new guidance makes it clear that HMRC’s view has changed and that the 3% surcharge will not apply to the dwelling element. The guidance adds the caveat that the non-residential element of the transaction is neither negligible nor artificially contrived.
This change could allow affected purchasers to claim back any overpaid SDLT on mixed use, multiple dwelling transactions from HMRC within the legal time limits. HMRC’s guidance also suggests that purchasers can now make a non-statutory clearance application in the event of uncertainty over a transaction.
HMRC explains what is not considered a “higher rate transaction”
The following transactions will not comprise higher rates transactions and the higher rates will not apply. Purchases of: –
· non-residential or mixed residential and non-residential properties, except for a transaction which incorporates more than one dwelling, when
1. a ‘Multiple Dwellings Relief’ claim is made in respect of the residential element of the transaction, and
2. the non-residential element of the transaction is negligible or artificially contrived.
(See SDLTM29900 for more details on ‘Multiple Dwellings Relief’)
· property where the consideration given is less than £40,000 [Paras 3(2), 4(c), 5(2), 6(1)(c) and 7(1)(c)]; and
· caravans, houseboats and mobile homes.
Caravans, houseboats and mobile homes are usually chattels and any payment in respect of the plot is usually for a license; they are therefore not usually chargeable to SDLT.
If a moveable asset of this type becomes sufficiently fixed to the land to become part of the land then we would no longer consider it to be a caravan, mobile home or houseboat. In such cases, the resulting building or structure may be a dwelling if it meets the normal definition. More detailed guidance is found at SDLTM10023.
If you need advice on this article or what it may mean for you, call MJB Avanti (08000) 388 799
Source Informanagement / HMRC