HMRC’s guidance on transactions involving mixed purchase has undergone a recent amendment, stating that Stamp Duty Land Tax (SDLT) liability could be reduced on a mixed purchase transaction involving more than one residential property.
SDLT change concerning mixed-use properties
HMRC introduced the higher rates of SDLT to be applied to additional residential properties like second homes and buy-to-let properties on 1 April 2016. When an individual purchases a mixed-use building with both non-residential and residential properties, they would normally pay the non-residential rates of SDLT or can make a claim for Multiple Dwelling Relief (MDR) if the trasanction involves more than one residential property.
Earlier, HMRC’s position was that higher rates of SDLT (additional 3% rate) should be applied when claiming MDR. but this has been amended now and the guidance states the normal rates of SDLT can be applied if the non-residential element is not negligible or artificially contrived.
The guideline available in HMRC’s manual SDLTM09740 on this matter was updated on November 13th, 2020. It is clear from the new guidance that the view of HMRC has changed significantly on the matter and the 3% surcharge will not be applicable to the dwelling part where MDR is claimed.
Because of this change, affected buyers could claim any overpaid SDLT from HMRC on non-residential or mixed-use buildings within the legal period of time. The guidance of HMRC also recommends buyers to go for a non-statutory clearance application if there is any uncertainty regarding a transaction.
Taxpayers with mixed purchases who claimed MDR and paid SDLT at the higher rates could claim a refund. In the same vein, if you did not make a claim for this particular relief because the effective rates would have increased by using the higher rates, you might be able to get a refund.
You can make this claim within twelve months of SDLT return’s due date, which was filed for the mixed purchase. Taxpayers could also consider going back three years, but this may be at the discretion of HMRC for practical purposes.
Conclusion
This clarification will be able to help purchasers assess SDLT on the purchase of mixed-use properties correctly and figure out whether or not it will be beneficial to make a claim for MDR. There will naturally be cases where MDR has been claimed, yet SDLT assessment has taken place at higher rates for the dwelling part of the transaction. Taxpayers might also be able to claim the overpayment, in this case, using the overpayment relief. Moreover, this relief can be considered for the past four years..
As a Professional Property Tax Accountants, We recommend taxpayers to review their mixed purchases over the previous four years, excluding the ones where they purposely built the dwellings for student accommodation. Consider prioritising the dwellings that were purchased in the previous year and claim them before the due date of the return. Checking these purchases will also allow you to check if you have overpaid SDLT previously.
FAQs: SDLT on Mixed-Use Buildings
What is SDLT?
SDLT stands for Stamp Duty Land Tax. It is a tax on property transactions in the UK.
What is a mixed-use building?
A mixed-use building is a property that has both residential and non-residential elements, such as commercial or retail spaces.
How is SDLT calculated for mixed-use buildings?
SDLT for mixed-use buildings is calculated based on the proportion of the property that is residential and non-residential. Different rates apply to each portion.
What are the SDLT rates for mixed-use properties?
The SDLT rates for mixed-use properties vary depending on the value of the residential and non-residential elements. You can find the current rates on the HM Revenue & Customs website.
Are there any reliefs or exemptions for SDLT on mixed-use properties?
There are certain reliefs and exemptions available for SDLT on mixed-use properties, such as the Multiple Dwellings Relief and the Mixed-Use Property Relief. These can help reduce the amount of SDLT payable.
Do I need to pay SDLT on the entire purchase price of a mixed-use property?
No, SDLT is only payable on the chargeable consideration for the property, which may be less than the total purchase price, especially in cases where there are reliefs or exemptions applicable.
How do I determine the residential and non-residential elements of a mixed-use property?
The residential and non-residential elements of a mixed-use property can be determined based on the floor area, usage, and other relevant factors. It’s important to seek professional advice to accurately assess the proportions.
Can I claim SDLT refunds if the use of the property changes after purchase?
In certain cases where the use of the property changes, it may be possible to claim SDLT refunds or make adjustments. However, it’s essential to consult with a tax advisor or legal professional for specific guidance.
What documentation is required for SDLT on mixed-use properties?
When purchasing a mixed-use property, you will need to complete an SDLT return and pay any tax due within 14 days of the transaction. You will also need to provide details of the property and the purchase price.
Where can I find more information about SDLT on mixed-use buildings?
For more detailed information about SDLT on mixed-use buildings, including specific calculations, reliefs, and exemptions, you should refer to the official guidance provided by HM Revenue & Customs or seek advice from a qualified tax advisor.