HMRC SDLT: SDLTM09740 – SDLT – higher rates for additional dwellings – higher rates transactions – Para 3 Sch4ZA FA2003
SDLT Higher Rates for Additional Dwellings
This section of the HMRC internal manual provides guidance on the higher rates of Stamp Duty Land Tax (SDLT) applicable to additional dwellings. It explains the principles and concepts outlined in Paragraph 3, Schedule 4ZA of the Finance Act 2003.
- Details on higher rates transactions for additional properties.
- Clarification of legislative requirements under FA2003.
- Guidance for HMRC staff on applying SDLT rules.
- Information on exceptions and specific scenarios.
Read the original guidance here:
HMRC SDLT: SDLTM09740 – SDLT – higher rates for additional dwellings – higher rates transactions – Para 3 Sch4ZA FA2003
Understanding Higher Rates of Stamp Duty Land Tax (SDLT)
What are Higher Rates Transactions?
The higher rates of Stamp Duty Land Tax (SDLT) apply to certain purchases of properties known as ‘higher rates transactions.’ A transaction is classified as a higher rates transaction if it meets specific criteria found in paragraphs 3 to 6 of Schedule 4ZA of the Finance Act 2003. For detailed conditions, you can refer to SDLTM09765 and the following sections.
What is Considered a Major Interest?
A major interest in a dwelling can be described as:
– Freehold ownership: This means you own the property and the land it sits on outright.
– Leasehold ownership: This means you hold the rights to the property for a set duration.
– Undivided share: This includes sharing ownership with others of a major interest in a dwelling.
For a leasehold interest to be classified as a major interest, it must be originally granted for more than seven years.
Example 1: A leasehold interest granted for 100 years, with only four years left until expiration, is classified as a major interest for the higher rates rules.
Example 2: A leasehold granted for six years with the full duration remaining is not considered a major interest for the higher rates.
Transactions that are Not Higher Rates Transactions
Certain purchases fall outside the higher rates of SDLT and thus won’t incur these charges. These include:
– Non-residential properties: This can include commercial properties or mixed-use properties that have both residential and non-residential elements. However, exceptions exist if:
– A claim for ‘Multiple Dwellings Relief’ is made for the residential portion.
– The non-residential part is either negligible or artificially created.
For more information on ‘Multiple Dwellings Relief,’ refer to SDLTM29900.
– Properties with a purchase price below £40,000: The higher rates do not apply to transactions where the total consideration (purchase price) is less than this amount.
– Caravans, houseboats, and mobile homes: These are generally treated as personal property, not subject to SDLT. Payments associated with these are usually for a license rather than ownership of the land.
Note: If one of these moveable assets, like a caravan, becomes permanently attached to the land, it may then qualify as a dwelling if it meets the residence criteria. More guidance on this can be found at SDLTM10023.
Questions about Mixed Transactions?
If there is uncertainty regarding whether HMRC would view the non-residential part of a mixed-use transaction as negligible, you can apply for a clearance. This is done through HMRC’s non-statutory clearance service. More information can be found on the Gov.UK website.
Special Rule for Companies
In certain cases, companies may purchase properties at a 15% rate for higher threshold interests in dwellings without incurring higher rates. This is outlined in Schedule 4A of the Finance Act 2003. However, if part of the purchase involves chargeable interests that do not qualify as higher threshold interests, that portion of the transaction could still be subject to higher rates if it meets the relevant conditions.
Example: If a company buys a property that qualifies for the 15% rate but also includes an additional property or interest that does not qualify, the non-qualifying part may incur SDLT at higher rates.
Summary of Key Definitions
– Higher Rates Transaction: A property transaction that meets the criteria set out in paragraphs 3 to 6 of Schedule 4ZA FA2003. This triggers higher rates of SDLT.
– Major Interest: This refers to owning a freehold or a long-term leasehold interest in a dwelling.
– Non-residential Properties: Transactions involving commercial properties or mixed-use properties that include residential elements but fall under certain exceptions.
– Caravans, Houseboats and Mobile Homes: Although usually not considered dwellings for SDLT purposes, these can change status once fixed to land.
The rules surrounding higher rates of SDLT can be complex, especially for mixed-use properties or new purchases by companies. It’s always best to seek clear, professional advice if you’re unsure about a specific transaction. If you need further guidance, consider checking the official HMRC documents or consulting a tax professional experienced in property transactions.