Mixed Use Stamp Duty Land Tax –More Points to Consider

In my previous blog on this subject we examined the criteria for a property being treated as Mixed Use for the purpose of Stamp Duty Land Tax (SDLT).  Here we will look at a couple of points relating to the impact ownership of mixed use property has on the SDLT due on other transactions.

First Time Buyers

Since 22^nd November 2017 First Time Buyers (FTBs) of dwellings have been entitled to relief from SDLT.  For FTBs of properties in England or Northern Ireland, no SDLT is payable on properties worth up to £300,000.  For properties costing up to £500,000, FTBs pay no Stamp Duty on the first £300,000, with SDLT payable on the balance.  Properties worth over £500,000, so not qualify for FTB relief; as such the standard rate of SDLT will be payable.

HMRC guidance states that in order to count as a First Time Buyer (FTB), “a purchaser must not, either alone or with others, have previously acquired a major interest in a dwelling or an equivalent interest in land situated anywhere in the world.”

FTB relief is available if the purchaser owns or has previously owned non-residential or mixed-use property, as long as that property did not include a dwelling.  For the purpose of FTB relief, HMRC define a dwelling as “a building or part of a building that is used or suitable for use as a single dwelling”, although “residential accommodation for school pupils, purpose-built student accommodation, purpose-built accommodation for members of the armed forces and some other types of institutional accommodation” are excluded.

As such, it can be safely concluded that if a FTB owns a mixed-use property that comprises residential accommodation that is capable of being occupied as a single dwelling (e.g. a flat above a shop with separate access), relief from SDLT will not be available.  It can also be safely concluded that a FTB who owns a mixed-use property comprising ground floor shop and first floor hotel (where the hotel includes accommodation for the manager) would be entitled to relief.

As ever though, there will always be mixed-use properties that are more difficult to determine as comprising an element that can be defined as a dwelling.  In all cases though, you should inform your solicitor that you own other property, irrespective of whether it is non-residential or mixed-use, before claiming FTB relief.

Additional Residential Dwelling

Whilst Higher Rate SDLT is not payable on mixed-use properties, the residential element of the mixed-use properties in which the purchaser has a major interest must be taken into consideration on subsequent purchases of residential dwellings.  If the residential element or elements of the mixed use property or properties owned by the purchaser are worth more than £40,000, the Higher Rate SDLT will be payable by the purchaser on their purchase of a residential dwelling, even if they are going to occupy it as their main residence.

In all cases, you should inform your solicitor if you have any interest in a mixed-use property (and any other residential property) from the outset of a purchase of residential property so that they can help determine whether or not the higher rate of SDLT will be payable.

Please note, the information in this blog is correct at the date it was published but should not be construed as legal advice as this will depend on the individual’s specific circumstances.

To speak to a lawyer with experience of mixed use stamp duty land tax and other property matters, please call 0845 287 0939 or submit your enquiry online.