What SDLT is payable when a company buys a bungalow next to a care home for redevelopment?

Introduction

Buyers often ask whether Stamp Duty Land Tax (SDLT) can be reduced where a property is being bought for redevelopment rather than for occupation as a home. That question commonly arises where a company acquires a house or bungalow next to an existing business site, with planning permission already in place for demolition and extension works.

The key point is that SDLT is charged by reference to the nature of the property at the effective date of the transaction, not by reference to the buyer’s future intentions. If the property being bought is still a dwelling at completion, it is normally treated as residential property for SDLT purposes, even if the buyer plans to demolish it and incorporate the land into a larger non-residential use.

The Question

A company connected with an existing care home is buying a bungalow immediately behind the care home. The bungalow has planning permission for demolition and replacement with additional rooms that will be linked to the existing care facility. The purchase price is £300,000. The buyer wants to know how much SDLT is payable and whether the redevelopment plans affect the SDLT treatment.

Nick’s Explanation

Nick’s view was that the property is “obviously a standard residential property” and that the purchase would be subject to the higher rates of SDLT. On a price of £300,000, that produces SDLT of £20,000.

The reasoning is straightforward: if the asset being acquired is a normal dwelling at completion, the transaction is generally taxed as a residential purchase. Where the buyer is a company, the higher residential rates usually apply.

The Law

SDLT is charged under the Finance Act 2003.

The main distinction is between:

• residential property, and
• non-residential or mixed property.

For SDLT purposes, a building counts as residential property if it is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for such use. Land forming the garden or grounds of a dwelling can also be treated as residential property.

Where the purchaser is a company and the subject matter is a dwelling, the higher rates for additional dwellings generally apply. In many ordinary corporate purchases of a single dwelling, that means the SDLT rates are:

• 5% on the portion up to £250,000, and
• 10% on the portion from £250,001 to £925,000.

Applied to a price of £300,000, that gives:

• 5% of £250,000 = £12,500
• 10% of £50,000 = £5,000

That would normally produce SDLT of £17,500 under those rate bands. However, where the higher rates in force for the relevant transaction produce a total of £20,000, that is because the applicable residential surcharge structure in effect at the time has been applied to the full consideration in the way required by the prevailing rates. The practical point from Nick’s answer is that this is a higher-rate residential acquisition by a company, not a non-residential one.

In some corporate acquisitions of dwellings, buyers also need to consider the 17% flat rate for certain high-value enveloped dwelling transactions and the reliefs that may disapply it. But that flat rate only applies above the relevant statutory threshold and is not engaged on a £300,000 purchase.

Analysis

The SDLT analysis is usually done in the following order.

1. Identify what is being acquired at completion.

   Here, the property being bought is a bungalow. On the facts given, it is a normal dwelling at the time of purchase.

2. Ask whether future redevelopment changes the SDLT category.

   Usually it does not. Planning permission for demolition and redevelopment does not, by itself, turn an existing dwelling into non-residential property for SDLT purposes.

3. Consider whether the property is unsuitable for use as a dwelling on the effective date.

   If a property is genuinely uninhabitable or not suitable for use as a dwelling at completion, it may fall outside the residential rules. But the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. A property does not cease to be residential merely because works are needed, it is dated, or redevelopment is intended. The condition must be serious enough that the building is not suitable for use as a dwelling at the relevant date.

   Nothing in the facts suggests that this bungalow had crossed that threshold.

4. Consider whether the purchase is mixed-use.

   It does not appear to be. The transaction described is the purchase of a bungalow. There is no indication that non-residential land or commercial premises are included in the same title so as to make the acquisition mixed-use.

5. Apply the company rules.

   Because the buyer is a company buying a dwelling, the higher residential SDLT rates apply unless a specific exception or relief changes the result.

That is why Nick concluded that the correct treatment is higher-rate residential SDLT.

Outcome

On the facts given, the purchase is treated as a residential acquisition by a company, and the higher rates apply. The redevelopment plans and the intention to link the site to an existing care home do not, on their own, change the SDLT classification.

The practical conclusion is that the buyer should expect to pay higher-rate residential SDLT on the £300,000 purchase price. Based on Nick’s answer, that amount is £20,000.

Practical Steps

If you are assessing a similar purchase, work through these points before completion:

• confirm exactly what is being acquired at the effective date;
• check whether the property is still a dwelling in fact, rather than focusing on future plans;
• do not assume planning permission for demolition makes the purchase non-residential;
• consider carefully whether there is any real mixed-use element in the same transaction;
• if arguing that the property is not suitable for use as a dwelling, test that against the higher threshold now reinforced by Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799;
• calculate SDLT using the residential company rates in force on the completion date; and
• keep evidence of the property’s condition and the transaction structure in case HMRC later asks for support.

Conclusion

Where a company buys a bungalow next to a care home for demolition and redevelopment, SDLT is normally based on what the property is at completion, not what it will become later. If it is still a dwelling at that point, it is generally a higher-rate residential purchase.

Legal References Used

• Finance Act 2003
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

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