SDLTM09785 - SDLT - higher rates for additional dwellings: Condition C - further information

Testing each dwelling

Each dwelling owned at the end of the day should be valued separately for the £40,000 or more condition. Several individual interests below this value will not cause Condition C to be met even where they add up to £40,000 or more in total.

The interest held at the end of the day must be an interest in another dwelling [Para 3(4) (a)]. A further interest owned in the same dwelling in which a major interest has been purchased will not, on its own, cause Condition C to be met.

If an individual is a joint owner of another dwelling then they may meet Condition C if the interest in land is a major interest, is not subject to a lease of longer than 21 years and the interest that the individual holds is worth £40,000 or more.

Cases of no beneficial ownership

Where an individual is one of the legal owners of another dwelling (their name is on the title at the Land Registry) but they have absolutely no beneficial interest in that other dwelling, they will not own an interest in that other dwelling that meets Condition C. This would have to be evidenced in writing. Any entitlement to capital proceeds from the sale of the property, to income or to occupy the property would likely mean that they do have a beneficial interest.

An individual who is a partner in a partnership will be treated as owning a major interest in a dwelling if a major interest is held by or on behalf of the partnership [Para 2 Sch 15 FA 2003], but see special rules at SDLTM09790 for trading partnerships.

Example – parental help

Mr and Mrs M are helping their son buy his first property by providing the deposit for a flat which will be his main residence. Mr and Mrs M currently own just one property, the family home. Due to the bank’s lending criteria they require Mrs and Mrs M to be a party to the mortgage and be on the deeds of the property. On the same day as the purchase a deed will be executed which will provide that Mr and Mrs M have no interest in the property and that their son has full beneficial interest in the property. The higher rates will not apply because Condition C is not met for the son and the son is the only “purchaser”.

Dwellings outside England and Northern Ireland

An interest in a dwelling outside of England and Northern Ireland is to be counted for the purposes of Condition C. Other legal systems will often have different land law concepts or land tax rules and it is a question of fact whether an interest owned by an individual is equivalent to a major interest and whether it is for a term of more than seven years and not subject to a lease of more than 21 years.

Holding a mixed residential and non-residential property

An individual holding a mixed residential and non-residential property will meet Condition C if the property contains a dwelling worth £40,000 or more. A self-contained flat above a shop or public house with separate access will normally be a dwelling, separate from the commercial premises below. This is the case whether they were purchased as part of the same transaction or not. The guidance as to what comprises a dwelling in SDLTM09750 applies to self-contained parts of a building as well as whole buildings.