SDLTM09766 - SDLT - higher rates for additional dwellings: Individuals – purchasing two or more dwellings - Para 5 Sch 4ZA FA2003

[Please note this page was substantially amended on 13 November 2020 and split into two pages, adding SDLTM09766a]

Where an individual purchaser acquires two or more dwellings in the same transaction, there are two different tests to determine whether the transaction is liable to the higher rates of tax.

A transaction involving more than one dwelling will either be liable to the higher rates of tax or it won’t. The rules do not allow for a single transaction involving only residential property to be a combination of higher and normal residential rates.

Where more than one dwelling is purchased in a single transaction and one dwelling is worth at least two-thirds of the total transaction value, special rules may apply (See SDLTM09755)

The first test is met for a purchase of multiple dwellings where at least two of the dwellings meet conditions A, B and C in Para 5 Sch4ZA FA2003.

  • Condition A - the chargeable consideration attributable to a dwelling on a just and reasonable basis is £40,000 or more.

  • Condition B - the major interest purchased is not subject to lease which has more than 21 years to run on the date of purchase.

  • Condition C – A purchased dwelling is not subsidiary to any other purchased dwelling.

A dwelling is subsidiary to another purchased dwelling if it is in the same building or grounds, and the chargeable consideration attributable to that other purchased dwelling on a just and reasonable basis is at least two thirds of the total consideration for the purchase.

EXAMPLE – George buys a three-storey town house including a basement apartment with independent external access. The total consideration is £1m of which £250k is apportioned to the basement apartment. George has purchased multiple dwellings. One of the dwellings is subsidiary to the other. Condition C is not met for the basement apartment. Para 5 does not apply the higher rates to the transaction.

If at least two of the purchased dwellings meet all three of these conditions, then the whole transaction is a “higher rates transaction” and the higher rate of SDLT applies.

EXAMPLE – Janet buys a detached house with a separate coach house in the grounds for her mother to occupy. The total consideration is £1m of which £350k is attributable to the coach house. As this is over one third of the total consideration. neither dwelling is subsidiary to the other. Conditions A to C are met for both dwellings acquired, and the higher rates will apply under Paragraph 5.