HMRC SDLT: SDLTM09810 – SDLT – higher rates for additional dwellings: Condition D – further examples

SDLT Higher Rates for Additional Dwellings: Condition D – Further Examples

This section of the HMRC internal manual provides detailed guidance on the higher rates of Stamp Duty Land Tax (SDLT) applicable to additional dwellings. It focuses on Condition D, offering further examples to clarify its application.

• Explains the principles of SDLT higher rates for additional properties.
• Provides examples to illustrate Condition D.
• Aims to assist HMRC staff in understanding the nuances of SDLT regulations.
• Published by HM Revenue & Customs on GOV.UK.

SDLT – Higher Rates for Additional Dwellings: Condition D – Further Examples

The Stamp Duty Land Tax (SDLT) rules include higher rates for additional dwellings. Understanding the specific conditions, especially Condition D, is essential when considering property purchases. Below are several examples to explain how these higher rates apply in various situations.

Example 1: Married Couple Purchasing a Joint Property

Mr and Mrs S are married and each own a residential property without any ties to each other’s. They live in Mrs S’s property, while Mr S rents out his property. Mrs S is selling her home, and they are buying a new residence together which will be their main home. Mr S intends to keep renting out his property.

• The total consideration for the purchase is £40,000 or more, and no lease is involved, so Conditions A and B are satisfied.
• Condition C is relevant: Mr S meets this condition as he has a major interest in another property. However, Mrs S does not meet Condition C as she does not own any other major dwelling.

Now we assess Condition D for Mr S. Since Mrs S has already failed Condition C, we don’t need to check this condition for her. Mr S is considered to be replacing their main residence because they lived in Mrs S’s property before. This condition is passed because the previous home belonged to either him or his spouse. Hence, the transaction is not classified as a “higher rates transaction.”

The higher rates do not apply to the joint purchase since they lived in the property owned by Mrs S as their main home. Therefore, Mr S is seen as replacing their main residence, resulting in Mrs S owning only one property at the end of the transaction.

However, if Mr and Mrs S had not lived together in Mrs S’s old house, Condition D would not be satisfied for Mr S. This means the transaction would be subject to higher rates, as the previous house wouldn’t be considered his main home.

Example 2: Unmarried Couple Buying Together

In this case, Mr P and Ms B are not married and each own a residential property, without any connection to each other’s property. They reside together in Ms B’s property, while Mr P rents out his. Ms B plans to sell her home, and they will buy a new one to be their main home. Mr P will keep holding his rental property.

• Conditions A and B are satisfied since the same principles apply regarding the interest purchased.
• Condition C is met for Mr P as he owns another property on the purchase date. Ms B does not meet Condition C, but only one buyer needs to meet the conditions for the higher rates to be applicable.

Next, we examine Condition D. Ms B fails this test as she is only replacing her main residence. However, Mr P meets Condition D because he is not replacing a main residence. Although he lived in Ms B’s previous property, he had no ownership in it, so he is not considered to lose his main residence when Ms B sells hers.

Thus, the purchase is classified as a higher rates transaction because Mr P’s ownership does not change in regard to his main residence, even though they lived together.

Example 3: Existing Homeowner Buying a New Main Residence

Mr T owns a main residence and a buy-to-let property. He is in the process of purchasing a new main residence, intending to keep his current home to rent out while selling his buy-to-let property, which may happen after the new purchase.

In this scenario, higher rates will apply since after the purchase, Mr T will own an additional residential property and is not replacing his main residence and refunds are not possible as the sale of the buy-to-let will not satisfy the replacement requirement.

Example 4: Shifting from Previous Main Residence

Ms G has two buy-to-let properties, having sold her previous main residence six months ago. She has temporarily moved into one of her buy-to-let properties as she looks for a new main residence. After buying a new main home, she will rent out her buy-to-let property again.

Ms G can be seen as replacing her main residence, as the house she sold was her only home and she had lived there sometime in the last three years. The fact that she stayed in her buy-to-let property does not make a difference in this determination.

Example 5: Mixed-Use Property Owners

Mr and Mrs C own a mixed-use property, specifically a shop with a flat above it, both rented out. They have been living in a rented accommodation for more than three years and are now in the process of buying a new home which will be their main residence.

The higher rates will apply since they already own an interest in another residential property: the flat above their shop, which triggers the higher rates.

Example 6: Purchasing a Share in a Jointly Owned Property

Ms D owns two residential properties: her main home and a 25% share in another property shared with three friends. Each friend has a 25% stake in the property, which is valued above £40,000. Ms D now wants to purchase one friend’s 25% share.

The higher rates will be applicable here because Ms D will be buying a major interest in a property, not replacing her main home, and she owns another property. Also, since she hasn’t occupied this other property in the last three years, she cannot use the preceding rules to exempt this purchase.

Example 7: Acquiring Remaining Share of a Residence

Miss L has two properties: a buy-to-let, and a 50% share in a property with her sister. The jointly owned property is her main home, where she has lived for the last three years. Miss L plans to buy the remaining 50% of her main home from her sister.

• For purchases before 22 November 2017, higher rates will apply as Miss L would be obtaining a major interest in a property, not replacing her home and owning another property.
• For purchases on or after 22 November 2017, higher rates will not apply because Miss L’s transaction is disregarded as she is increasing her interest in her main residence.

Example 8: Property Transfer Between Spouses

Mr and Mrs X co-own two properties – they live in one and rent the other. Mr X is transferring his share of their main home to Mrs X, who will take over the mortgage.

If the transfer occurred before 22 November 2017, the higher rates would apply because Mrs X owned an interest in another property and was not replacing her main residence.

However, if the transfer is on or after this date, the higher rates do not apply as Mrs X’s action is disregarded since she is obtaining the property solely from her spouse.

Example 9: Merging Properties Next Door

Ms Q plans to buy the house next to her current home with the intention of merging them.

In this case, the higher rates will apply because after the purchase Ms Q will own an additional property and is not replacing her main residence. A refund cannot be claimed once the merger is done, as refunds only occur when a previous main residence is sold.

Example 10: Lease Extension Purchase

Mr E has two flats: he lives in one and rents out the other. He is extending the lease on his main residence.

• Before 22 November 2017, the higher rates would have applied because Mr E was acquiring a

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