Stamp Duty Land Tax (SDLT) is becoming increasingly more complex as HMRC tighten the legislation around the purchase of residential properties.

It’s now widely known that individuals purchasing a second residential property will pay an additional 3 per cent on top of the usual SDLT rates. However, the rules around companies purchasing residential properties are far less well known.

If a company purchases a residential property costing more than £500,000, and it doesn’t fit under any of these exemptions below, then a flat 15 per cent rate of SDLT applies:

  • Property development businesses, which are those that buy and develop or redevelop residential or non-residential properties for resale and are run on a commercial basis with a view of making profit
  • A rental business that acquires properties in order to receive an income by the receipt of rent (excluding properties which are rented to any connected person)
  • Financial institutions acquiring property in the course of lending
  • Property occupied by employees such as accommodation located on or next to a school for the on-site caretaker
  • Farmhouses
  • Property made available to the public, such as an historic palace or castle

A residential property may, however, not be as obvious as it seems. In this case it is a ‘dwelling’ or a property ‘suitable for use as a dwelling’, which includes any property which, at the date of purchase, was being used as a dwelling. This means that even if you intend to make the property your business premises; if it was a dwelling at the time of purchase it will still be a dwelling when you make it your business premises. In this scenario, the 15 per cent rate applies.

We now know of three potential instances in which this 15 per cent SDLT rate has been overlooked by solicitors completing the Stamp Duty Land Tax Return. We’re urging all clients to ask more of their conveyancer