SDLTM09740 - SDLT - higher rates for additional dwellings - higher rates transactions - Para 3 Sch4ZA FA2003
(Please note that this page was signficantly amended on 13 November 2020)
The higher rates of SDLT will apply to any purchase of a major interest in a dwelling or dwellings which meets the definition of a “higher rates transaction.” A “higher rates transaction” is a transaction which meet the conditions set out in any of Paras 3 to 6 of Sch4ZA FA2003. These conditions are covered in detail at SDLTM09765 onwards.
A major interest in a single dwelling means freehold or leasehold ownership of that dwelling. It includes an undivided share in a major interest in a dwelling [Para 2(5)]. In addition, a leasehold interest must have been originally granted for a term of more than seven years to comprise a major interest in land [Para 2(4)].
Example
A leasehold interest originally granted for 100 years but with only four years left before it expires will be treated as a major interest in land for the purposes of the higher rates rules.
A leasehold interest originally granted for six years with all six years left to run will not be treated as a major interest in land for the purposes of the higher rates rules.
What is not a “higher rates transaction”
The following transactions will not comprise higher rates transactions and the higher rates will not apply. Purchases of: -
- non-residential or mixed residential and non-residential properties, except for a transaction which incorporates more than one dwelling, when
- a 'Multiple Dwellings Relief' claim is made in respect of the residential element of the transaction, and
- the non-residential element of the transaction is negligible or artificially contrived.
(See SDLTM29900 for more details on 'Multiple Dwellings Relief')
- property where the consideration given is less than £40,000 [Paras 3(2), 4(c), 5(2), 6(1)(c) and 7(1)(c)]; and
- caravans, houseboats and mobile homes.
Caravans, houseboats and mobile homes are usually chattels and any payment in respect of the plot is usually for a license; they are therefore not usually chargeable to SDLT.
If a moveable asset of this type becomes sufficiently fixed to the land to become part of the land then we would no longer consider it to be a caravan, mobile home or houseboat. In such cases, the resulting building or structure may be a dwelling if it meets the normal definition. More detailed guidance is found at SDLTM10023.
If there is uncertainty as to whether HMRC would regard the non-residential component of a mixed transaction as negligible in determining whether the transaction comprises a higher rates transaction, a clearance application can be made in accordance with the non-statutory clearance service offered by HMRC. A link to the Gov.UK guidance on non-statutory clearances can be found HERE
Exception for certain purchases by companies – Sch4A FA2003
The higher rates will not be charged on purchases that are charged at the 17% rate for purchases of higher threshold interests in dwellings by companies. (Sch4A FA2003) However, where such a purchase includes a chargeable interest that is not a higher threshold interest, the deemed separate transaction in those interests [Para 2(3) Sch4A FA2003] may be subject to the higher rates if the purchase of those remaining interests meets the conditions.