Home Forums Patrick Cannon Higher Rate SDLT for additional properties

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    C Shah


    I had a query in relation to the 3% higher rate SDLT which is due on additional dwellings purchased with effect from 1 April 2016.

    One of our clients is a Limited Liability Partnership (“LLP”) whose members comprise of two limited companies incorporated and resident in the UK. The LLP’s intention is to acquire a site which currently has a single dwelling on it and is suitable for habitation, develop the site to build 2 residential dwellings and sell the 2 dwellings.

    The trade of the LLP is that of property development.

    Paragraph 5 of Schedule 4A of FA 2003 provides relief from the ‘higher rate’ of SDLT for property developers. However Schedule 4ZA of FA 2003 which has been included in the Finance Bill 2016 on the face of it implies that my client will be liable to the higher rate SDLT on the purchase of a dwelling.

    Whilst Schedule 4A has been enacted and provides relief from the ‘higher rate’ SDLT, the definition of ‘higher rate’ in Schedule 4ZA in paragraph 2 is different. This is my personal opinion – by penalising property developers such as my client who are in the trade of creating more houses, the enactment of Schedule 4ZA goes completely against the grain where one of the government’s policy by introducing the 3% SDLT on additional dwellings is to raise funding to support home ownership.

    I would welcome Patrick Cannon’s and the readers comments as to whether the higher rate 3% SDLT would apply to my client? If so, would the purchase of a site on which the 2 dwellings would be developed be considered as a ‘dwelling’ for the purposes of higher rate SDLT under Schedule 4ZA?

    Thank you

    C Shah

    #760 Reply

    As presently structured I cannot see anything that prevents this from being a “higher rates transaction” within Sch 4ZA so that the alternative Table A ie normal rates plus 3%, will apply. There may be some scope for your client though if the existing dwelling is demolished before it acquires the land and the sale contract does not provide for the construction of the new dwellings (see para 17 of Sch 4ZA). I agree with your personal opinion and this reinforces the suspicion that the 3% additional rate is really a simple tax rise despite the “fairness” rhetoric. If the Chancellor had really wished to assist first-time buyers why not turn the Alternative Table A on its head and put 15% onto buy to let investors in the ?0-?125,000 slice with the additional rates then reducing as prices increase and first time buyers fall away?

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