Read the original guidance here:
HMRC SDLT: SDLTM00360 – Scope: what is chargeable: land transactions: Residential and non-residential – relevant land

Understanding SDLT and Relevant Land for Property Transactions

What is SDLT?

Stamp Duty Land Tax (SDLT) is a tax that applies when you buy property or land in the UK. The amount you pay depends on the type of property you are buying, which can be residential or non-residential. This article will help you determine which category your land purchase falls into and what rates will apply.

Identifying Residential and Non-Residential Land

In many situations, it is easy to decide if the land is residential or non-residential. However, some cases may not be straightforward. The aim of this guidance is to clarify how to identify the right SDLT rates for your transaction.

Important Exemptions and Modifications

Before diving into details, it is important to note that specific rules exist that could change how SDLT applies. These cover certain situations detailed in the Finance Act 2003 (FA03) including:

• Schedule 6A: Relief for specific residential property acquisitions
• Schedule 6B: Transfers that involve multiple dwellings
• Schedule 4A: Higher rates for certain transactions
• Schedule 4ZA: Higher rates for additional dwellings and properties bought by companies

For detailed information regarding these specific rules, please refer to other sections of this manual. In most cases, SDLT regulations mentioned here relate to FA 2003 unless specified otherwise.

Defining Relevant Land

The term “relevant land” is crucial for understanding SDLT rates. According to section 55(3)(a) of the FA03, relevant land is described as ‘the land an interest in which is the main subject-matter of the transaction.’ This means it is the primary parcel of land that you are purchasing.

Chargeable Interest

Section 43(6) clarifies that when discussing land transactions, “chargeable interest” refers to the main interest acquired in the property. This includes:

• The main subject-matter of the transaction, which is the property interest being bought.
• Any rights or interests linked to it that are acquired simultaneously.

It is important to distinguish between the primary interest you are acquiring and any additional rights or interests. Only the main interest counts when determining the SDLT rate.

When to Assess the Nature of Relevant Land

The characteristics of the relevant land should be evaluated at the point of the land transaction. This can be defined as follows:

• If the transaction is completed at the time of signing but not fully performed, “the time of the land transaction” is the moment of completion.
• If there is a contract in place that is substantially carried out, then the assessment is based on when this substantial performance occurs. For more information on substantial performance, please check SDLTM07700.

Crucially, any changes that affect the land’s nature occurring after the transaction time, even if they fall on the effective date, are not considered in the SDLT assessment.

Linked Transactions Involving Different Property Types

When a purchaser is dealing with linked transactions, where they submit one or multiple returns involving both residential and non-residential property, the relevant land is defined differently. According to section 55(4), the relevant land is considered to be ‘the main subject-matter of any of the linked transactions.”

Applicable SDLT Rates

According to section 55(1C), if any of these linked transactions include a mixture of residential and non-residential properties, the non-residential rates will apply to all linked transactions. This means:

• There is no separate calculation for residential and non-residential rates.
• The only exception is if you are claiming multiple dwellings relief, which you can learn more about in SDLTM29900.

Conclusion

This guidance aims to help you identify whether your property purchase falls under residential or non-residential categories, ensuring you are aware of the correct SDLT rates applicable to your transaction. For any specific queries or detailed rules that may apply to your circumstances, please refer to further sections of the SDLT manual.