SDLTM09535 - Scope: when is Stamp Duty Land Tax (SDLT) chargeable: higher rate charge for acquisitions of residential property by certain non-natural persons FA03/S55/SCH4A: purchases of higher threshold interests with other chargeable interests FA03/SCH4A/PARA2
Where a transaction involves the acquisition of a number of chargeable interests, for example all residential property, a mix of residential and non-residential, or a mixed use property, FA03/SCH4A/PARA2 requires that the chargeable consideration be apportioned on a just and reasonable basis so that any higher threshold interests attract the 17 per cent higher rate charge and the normal charging rules are applied separately to the remaining interests.
This covers situations where, for example, a single transaction (the ‘primary transaction’) includes the acquisition of a large dwelling with a value exceeding the higher rate threshold and a second dwelling worth less than the higher rate threshold. It also covers the acquisition of a mixed use property which includes within it a dwelling with an apportioned consideration which exceeds the higher rate threshold.
In this situation the higher threshold interests must be treated as a separate transaction from the other interest(s) acquired at the same time and from the same person. The taxpayer is required to make two returns, the first in respect of the acquisition of the higher threshold interest and the second in respect of the acquisition of the interest(s) that are not higher threshold interests.
The acquisitions are not treated as linked transactions and the amount of tax due in respect of the acquisition of the interest(s) that are not higher threshold interests will be determined by the chargeable consideration apportioned to those interests, not the chargeable consideration for the primary transaction.
Where a taxpayer acquires both higher threshold interests and interests in other dwellings, FA03/S116(7) (single transaction involving six or more dwellings treated as a non-residential transaction) will apply where the conditions are met for the primary transaction.
The higher rates of SDLT for additional dwellings will only apply to those dwellings that are not subject to the 17 per cent rate if Multiple Dwelling Relief (“MDR”) was claimed for transactions prior to 1 June 2024(MDR was abolished with effect from 1 June 2024). Otherwise, the non-residential rates would apply to the dwellings that are not subject to the 17 per cent rate. The higher rate charge was increased from 15 to 17 per cent on 31 October 2024.
Prior to 1 June 2024, for the dwellings that were not subject to the 17 per cent rate the purchaser could either:
(i) pay the non-residential rates on the total consideration apportioned to them, or
(ii) claim Multiple Dwelling Relief, applying the higher rates for additional dwellings.
For transactions taking place on or after 1 June 2024, a claim to MDR is no longer an option.
Examples
On 31 October 2024 a company purchases chargeable interests in two dwellings for £600,000 and £400,000, respectively, from the same vendor. The interest in the first dwelling is a higher threshold interest and the other is not, so the £600,000 acquisition is charged at the higher rate of 17 per cent and the £400,000 acquisition is charged separately at the higher rates for additional dwellings.
An estate acquired by a company consists of a significant residential property and a large area of moorland. The total consideration is £5 million. The cost attributable to the dwelling is £2.5million. The higher rate charge applies to the dwelling and the appropriate non-residential rate to the remaining land acquired.
On 1 November 2024 a company purchases a chargeable interest in a dwelling for £1 million. At the same time, and in the same transaction, it purchases five other dwellings each with an attributable cost of less than £500,000. The £1 million acquisition is a higher threshold interest, so the 17 per cent higher rate applies and this acquisition must be returned separately. The acquisition of the five other properties is charged at the appropriate non-residential rate as the primary transaction includes six or more dwellings.
A company makes a mixed use purchase where the apportioned price for a dwelling is over £500,000. If the 17 per cent rate applies, the dwelling is taxed at 17%. The remainder is taxed at the non-residential rates. If there is a relief from the 17 per cent rate the normal mixed use rules will apply to the whole transaction and SDLT will be chargeable at the non-residential rates.