HMRC SDLT: SDLTM09750 – SDLT – higher rates for additional dwellings: Meaning of ‘dwelling’ – general – Para 18 Sch 4ZA FA2003

Principles and Concepts of 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 clarifies the definition of a ‘dwelling’ under Paragraph 18, Schedule 4ZA of the Finance Act 2003. Key principles and concepts include:

• Definition and criteria for a property to be considered a ‘dwelling’.
• Application of higher SDLT rates to additional properties.
• Exemptions and exceptions under specific conditions.
• Guidance on calculating SDLT for multiple properties.

Understanding Higher Rates for Additional Dwellings: Definition of a ‘Dwelling’

This guide explains how the term ‘dwelling’ is defined in the context of Stamp Duty Land Tax (SDLT) higher rates for additional properties. It focuses on the key elements that identify a purchase as a higher rates transaction.

Definition of a Dwelling

For the purposes of determining if a purchase is a ‘higher rates transaction,’ a dwelling is understood as:

• A building, or a part of a building, that is being used or can be used as a single dwelling, or
• A building that is currently under construction or being adapted to become a dwelling.

Parts of a Dwelling

When considering what constitutes a dwelling, it is important to note that:

• The gardens and grounds associated with the dwelling, as well as any buildings on the property (such as a detached garage), are considered part of the dwelling.
• If you buy land or a building that does not include an actual dwelling, this purchase will not attract higher rates.

Example of Dwelling Definition

For example, if someone purchases a piece of garden land from a neighbour, and this purchase does not involve any dwelling, it is not classified as a ‘higher rates transaction.’ This means that SDLT higher rates will not apply to this transaction.

Connection to Other Legislation

The definition of a dwelling for higher rates is similar to what is outlined in earlier guidance documents, starting from SDLTM00372.

Legislation Reference

According to Schedule 4ZA, land that is intended to be occupied or used in conjunction with a dwelling, as well as land that will benefit a dwelling, is also considered part of that dwelling. This is specifically mentioned in paragraphs 18(3) and 18(4) of the legislation.

Specific Scenarios

It is essential to clarify that this definition applies only when the dwelling is already under construction or undergoing adaptation. The purchaser’s future intentions for the land after acquiring it are not considered in this context.

Off-Plan Purchases

An off-plan purchase may still count as a dwelling under certain conditions:

• Contracts are in place for buying a building, or part of a building, that will be constructed or modified for use as a single dwelling.
• The effective transaction date is based on when the contract is significantly performed.
• At the time when substantial work is completed, the construction or changes to the building have not yet started.

Exceptions to the Definition of a Dwelling

Not every type of accommodation qualifies as a dwelling for higher rates purposes. As stated in paragraph 18(7), residential accommodations that fall under specific examples provided in section 116(2) or (3) will not be considered dwellings. This includes:

• Buildings that offer communal living situations, like care homes,
• Dormitories or halls of residence.

Key Points to Remember

• The definition of a dwelling under the higher rates rules includes properties specifically designed for single residential use.
• Land or buildings purchased that do not include any residential property do not qualify for higher rates.
• Purchases made for land intended for construction or adaptation can be classified as higher rates transactions if appropriate conditions are met.
• Only certain types of off-plan purchases may qualify as dwellings.
• Specific residential accommodations, such as care homes or student halls, are exempt from being classified as dwellings for the higher rates.

Further Information

For more detailed examples and explanations, you may wish to refer to additional guidance documents provided by HMRC on the SDLT system, specifically focusing on higher rates for additional dwellings.

For questions regarding higher rates for additional dwellings or doubts about property purchases, it is advisable to consult the governing legislation or seek professional tax advice.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09750 – SDLT – higher rates for additional dwellings: Meaning of ‘dwelling’ – general – Para 18 Sch 4ZA FA2003

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