Our client’s business is a property trader and my client are constantly looking to purchase new properties and is currently looking to purchase a property from the executors of an estate. Are the general SDLT rules the same here?
The general SDLT rules are the same other than there is a specific relief available for the acquisition of a dwelling by a “property trader” from the personal representatives of an estate if the conditions are met which would make the transaction exempt.
There are special reliefs available for certain acquisitions of residential property. Where the relief is for acquisition by a property trader from personal representatives the property trader is defined as being:
• either a company, an LLP, or a partnership whose partners are companies or LLP’s, and
• who carries on the business of buying and selling dwellings
Relief is therefore not available to a sole trader.
The conditions are:
• the acquisition is made in the course of a business that consists of or includes acquiring dwellings from personal representatives of deceased individuals,
• the deceased individual occupied the dwelling as his only or main residence at some time in the period of two years ending with the date of his death,
• the property trader does not intend to spend more than the permitted amount on refurbishment of the dwelling, or to grant a lease or licence of the dwelling, or to permit any of its principals or employees (or any person connected with any of its principals or employees) to occupy the dwelling, and that the area of land acquired does not exceed the permitted area.
The permitted area in relation to a dwelling, means land occupied and enjoyed with the dwelling as its garden or grounds that does not exceed– an area (inclusive of the site of the dwelling) of 0.5 of a hectare, or such larger area as is required for the reasonable enjoyment of the dwelling as a dwelling having regard to its size and character. HMRC confirms that if the area exceeds the permitted area, partial relief may be available.
There are however some circumstances where this relief is withdrawn, if:
• the property trader spends more than the permitted amount on refurbishment of the old dwelling, or
• where the property trader grants a lease or licence of the old dwelling, or
• where the property trader permits any of its principals or employees (or any person connected with any of its principals or employees) to occupy the old dwelling.[1]
[1] Reproduced from Croner Taxwise