HMRC SDLT: SDLTM00377A – Scope: what is chargeable: land transactions: residential property: the treatment of student accommodation (examples)

Principles and Concepts of SDLTM00377A

This section of the HMRC internal manual provides guidance on the treatment of student accommodation in relation to land transactions and residential property. It outlines what is considered chargeable under these circumstances.

• Defines the scope of chargeable land transactions.
• Explains the classification of student accommodation.
• Provides examples to illustrate the treatment of such properties.
• Clarifies tax implications for residential properties used as student accommodation.

Understanding SDLTM00377A – Treatment of Student Accommodation

This guidance explains how student accommodation is treated under UK Stamp Duty Land Tax (SDLT) when it comes to land transactions, especially residential properties. It covers the key points about what qualifies as chargeable and gives clear examples to illustrate how the rules apply.

Key Concepts

The main ideas you need to understand include:

• Residential Property: Property used for living, like homes or flats.
• Student Accommodation: Properties specifically designed for students, which often include shared facilities.
• Effective Date of Transaction (EDT): This is the date when the transaction takes place and is important for determining SDLT liability.
• Higher Rate of Additional Dwellings (HRAD): A higher SDLT rate that applies when buying additional residential properties.
• Main Residence Relief (MDR): A relief applicable to certain residential property transactions before a cutoff date.
• Section 116(7): A provision in tax legislation that treats the purchase of six or more dwellings in a single transaction as non-residential for SDLT purposes.

Examples of SDLT Treatment for Student Accommodation

Let’s look at some examples to clarify these principles.

Example 1: Purchasing a Block of Flats for Students

Company A buys a block of flats solely for students. Each floor contains:

• Lockable entrance doors leading from a communal stairwell.
• Individual study bedrooms, each with en-suite bathrooms.
• One communal kitchen and living area for residents.

In this case, the purchase is classified under category 2, meaning:

• The HRAD does not apply.
• Company A can claim MDR if the transaction occurred before 1 June 2024.

For MDR purposes, the tax treatment considers each floor as being used as a single dwelling, rather than treating every bedroom separately. If, instead of individual bathrooms, the floors had shared bathroom facilities, the treatment would remain the same.

In the past, before 1 June 2024, the provision under s116(7) could be used, where purchasing six or more dwellings in one go was treated as a non-residential transaction for SDLT. However, from 1 June 2024 onwards, if MDR is not available, s116(7) must apply for transactions involving six or more dwellings.

The building or parts of it must have been operating as student accommodation (excluding halls of residence) by the EDT. To validate this, HMRC expects to see proof confirming that it was indeed designated as student accommodation at the EDT. If Company C decides to convert the building for non-student accommodation after the EDT, the HRAD will not apply. Only the interest acquired at the EDT will affect the SDLT charge.

Example 2: Acquiring a Construction Site for Student Flats

In a different situation, Company B purchases a construction site that has planning permission to build a block of flats. However, the planning permission was granted before the EDT and does not specify that the flats must be for students.

Provided HMRC can confirm that construction started before the EDT, the purchase will fall under category 3. Thus:

• HRAD will apply irrespective of whether Company B intends to rent the flats only to students.
• MDR can still be claimed for transactions that took place before 1 June 2024, following the same conditions as described in Example 1.

This illustrates that if a building is planned or being built without a specific restriction for student use, but the construction has commenced before the EDT, the HRAD liability stands.

Key Conditions to Keep in Mind

• To benefit from the treatment under category 2 or Category 3, specific conditions apply to ensure the property has been used for student accommodation at the EDT.
• HMRC requires proof that any restrictions exist before or at the EDT to classify the property correctly.
• If a property has not been officially designated for a specific use on the EDT, it will be evaluated against regular residential property rules.

What to Provide for HMRC Verification

When dealing with these transactions, it’s vital to have the appropriate documentation ready for HMRC. This includes:

• Records showing how the property was used at the EDT.
• Planning permissions or evidence of use if the construction is ongoing.
• Details of agreements or restrictions that clarify dedicated student accommodations.

Without this supporting evidence, HMRC may not accept the tax treatment you are claiming.

Final Considerations on SDLT for Student Accommodation

When dealing with student accommodation and SDLT, it is imperative to understand how different categories of property and types of usage can affect your SDLT obligations. The primary focus is on the intended use of the property on the EDT and how it has been classified, whether it be as residential or non-residential. Having thorough documentation and understanding the key rules will ensure compliance and possibly save on SDLT charges.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM00377A – Scope: what is chargeable: land transactions: residential property: the treatment of student accommodation (examples)

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