08 June 18David Boyd
Stamp Duty Land Tax Accounting Blog Silver Levene

What’s the issue with Stamp Duty Land Tax?

You may have paid too much Stamp Duty Land Tax (SDLT) on property purchases, because:

  • Claims for multiple dwellings relief (MDR) are NOT always being identified, or
  • Properties which include both residential and non-residential use are NOT always using the lower “non-residential” rates of SDLT

We are finding that some conveyancers or property lawyers are not aware of these reliefs and are therefore not making the appropriate claims.

Failure to correctly make these claims can result in additional amounts of SDLT being paid, particularly for property purchases above £1 million. However, if addressed in time, we can make the appropriate claims on your behalf and ensure you have not paid more SDLT than is necessary.

What to look for?

  • Does the property you are acquiring comprise more than one dwelling? For example, you may be buying a property with a main house, but also a separate cottage or basement flat capable of operating as a separate dwelling.
  • Does the property you are acquiring have some non-residential use. For example, in a multi-storey property, it may be that part of the property is used as an office or retail premises and is not capable of being used as a dwelling without building work.
  • On larger properties, is a significant part of the land used as a farm or industrial site?

Multiple dwellings relief

Where two or more separate dwellings are purchased in a single or linked transaction, the buyer will be eligible for multiple dwellings relief (MDR) to reduce their property tax bill.  Properties subject to the 15% SDLT flat rate are excluded from the relief.

For the purposes of the relief a “dwelling” is a building or part of a building which is suitable for use as a single dwelling or is in the process of being constructed or adapted for such use.

MDR allows you to apply the residential rates of SDLT as if you were buying several smaller properties rather than one larger property and so you pay SDLT at lower rates (subject to a minimum tax rate of 1%).

SDLT is calculated at the average price paid for each dwelling, i.e.  you divide the total consideration by the number of dwellings to get an average value for each.

Residential/Non-Residential rates of SDLT

The SDLT rates can vary according to whether the property is in residential or non-residential use. In England and Northern Ireland, if a property is “mixed-use” comprising both residential and non-residential use, then the non-residential rates apply to the total consideration.

Non-residential property includes commercial properties, agricultural land and six or more residential properties bought in a single transaction.

The table below applies for freehold residential and non-residential purchases and transfers. (3% additional charge ignored).

Rate % Residential £ Rates % Non-residential £
0 0 – 125,000 0 0 – 150,000
2 125,001 – 250,000 2 150,001 – 250,000
5 250,001 – 925,000 5 250,001 +
10 925,001 – 1,500,000
12 1,500,001 +

What are the savings?

Price SDLT – residential rates, ignoring additional 3% rate SDLT – MDR relief for one additional dwelling, ignoring additional 3% rate SDLT – non-residential rates
£1,000,000 £43,750 £30,000 £39,500
£2,500,000 £213,750 £137,500 £114,500
£5,000,000 £513,750 £427,500 £239,500
£7,500,000 £813,750 £727,500 £364,500
£10,000,000 £1,113,750 £1,027,500 £489,500

How to make a claim for MDR or non-residential rates

  • If you have not yet filed an SDLT return, we can work with your lawyers to make sure they claim the reliefs due.
  • If the SDLT return has already been filed, an amendment can be made by writing to the Stamp Office, which we can do on your behalf.
  • The time limit to make a claim for MDR is 12 months after the filing date, which is 30 days after the “effective” date (usually completion) of the transaction. The claim is made by amending the return.
  • For a claim to use non-residential rates of SDLT, the time limit is 4 years from the effective date of the transaction.

If you have any questions, please contact David Boyd on 020 7383 3200 or david.boyd@silverlevene.co.uk