Can rebuilding a redundant dwelling avoid the 3% additional rate?

[David Gunn]

Hi Patrick

I read your guide re SDLT in which you say “if buying a redundant dwelling to knock down and re-build can you avoid the 3% additional rate
by getting the vendor to knock it down and buy the bare land?”.

I am in the process of purchasing a site with an existing residential dwelling on it. The site has planning to demolish the existing house and build 3 new houses in it’s place. If the existing house is demolished between exchange and completion does this mean I would not have to pay the additional 3% SDLT? My intention is to buy through my limited company but I could purchase in my name if it makes any difference. Purchase price is £930,000, so additional SDLT would be £27,900.

Thanks

David

[Patrick]

David, I am not aware that HMRC have accepted that this works. However there is a clue that this works from para 18(5) of Sch 4ZA which says that the substantial performance of a contract for a building that is to be constructed or adapted for use as a dwelling and construction or adaption has not begun at the time of substantial performance is to be treated as the acquisition of a dwelling. By implication this provision would have been unnecessary if the sale of bare land that was going to be used for the benefit of a dwelling was already caught (see also para 18(4)). You may be ok therefore but I suggest that you do not substantially perform the contract and instead complete on it as bare land with the old building completely removed and work on the new ones yet to commence.

[Andrew Marr]

Yes but wouldn’t it also need to be the vendor that demolishes the land. If the purchaser does so then substantial performance would be triggered before completion and residential rates would apply.

[Author]

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