Solicitors overlooking Stamp Duty rules prove costly for businesses

Manchester-based financial advisors, Champion Accountants, are urging business owners to ask more of their conveyancers when purchasing residential properties through their company as three of the firm’s clients have recently been affected.

Whilst the stamp duty rules for individuals purchasing their second residential property is well-known, the guidelines around companies purchasing such properties are far less so and can leave businesses at a disadvantage, explained Gill Molloy, group tax director at Champion Accountants.

She said: “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 but companies should be aware of exemptions if they don’t want to be faced with a nasty surprise.”

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

Gill added: “A residential property may also be ‘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.”

If you’re thinking of purchasing a new property this year and want to know more on how the changes may affect you, contact Gill Molloy on gill.molloy@championgroup.co.uk / 0161 703 2500