Here I explain how SDLT on mixed-use property works, how SDLT is calculated and how the mixed-use claims process works in SDLT.
What is a mixed-use property?
First, why is this important? Whether the purchase of a residential property with a large area of land is classed as entirely residential or of mixed residential and non-residential land can make a huge difference in the rates of stamp duty that apply to your purchase. For example, on the purchase of a house with land for £5m the saving in stamp duty will be up to £424,250 if the land is classified as mixed use so that the rates in Table B apply compared with the rates of SDLT charged under table A. In effect, mixed-use land is taxed at the same rates of SDLT as for stamp duty on commercial property.
Whether land is residential or mixed-use property for SDLT purposes depends on a number of factors including the size of the residence, the nature of the land, whether there is commercial use on a part of it and whether all of the land is required for the reasonable enjoyment of the dwelling on the property.
In 2018, HMRC quietly changed its approach to stamp duty land tax on mixed-use property, making it much more difficult to claim the Table B rates of SDLT instead of the higher Table A rates that apply to purely residential property, and ignored their then published guidance on SDLT.
In June 2019, HMRC updated its published guidance on the meaning of ‘garden or grounds’, making its previous SDLT guidance irrelevant.
However, the updated guidance has sparked confusion, as it does not distinguish between land that is required for the enjoyment of the dwelling and land that is not.
I wrote an article for Taxation Magazine on HMRC’s revised guidance as a follow-on from my 2018 article on HMRC’s change of practice.
The recent article reflects on the pre-existing article, examines and evaluates HMRC’s new guidance, and analyses the Hyman case (July 2019), in which HMRC’s new guidance was not considered. You can read the full article here in order to get a better idea of the position.
HMRC now argue that for SDLT the garden or grounds comprises all land included with a residential purchase and is residential unless there is positive business use before and after the purchase. However, this is not correct and can be challenged.
SDLT rates for mixed use property
The rates of stamp duty for mixed use property are 0% up to £150,000, 2% on the slice between £150,000 and £250,000 and 5% on any amount above that. The higher rates of up to 15% on a residential property do not apply even to the residential element of any mixed-use purchase ie there is no apportionment of the price for stamp duty purposes between the residential and the non-residential parts.
Where there is a purchase of two or more dwellings then multiple dwellings relief or MDR may be claimed and it will be sensible to compare the calculation of the total SDLT payable using MDR and the total SDLT payable if in the alternative a mixed-use claim is made. For more about MDR read my blog here.
HMRC’s guidance on mixed use property
The guidance is at SDLTM00440 to SDLTM00480 but should be viewed critically as HMRC’s view only and not accepted automatically as a correct statement of the law. You can read my thoughts on the published guidance here.
How claims work for mixed-use purchases
The SDLT return for the purchase of a mixed-use property is completed in a way that indicates to HMRC that the purchase is of mixed-use property for stamp duty purposes by using code 02 as the description of the property. See the SDLT return guidance here.
How Patrick can help with your claim
I can assist you by advising you whether the property you are buying or have bought can properly be classed as mixed-use property and chargeable with the reduced rates of stamp duty under Table B. Your solicitor or conveyancer may understandably request the comfort of an opinion from Counsel confirming whether a mixed-use stamp duty claim can be made. Such an opinion will also help protect you from any penalties should HMRC later on disagree with the claim and assert that full stamp duty under Table A was payable. I can also assist you by drafting a disclosure letter to be sent to the Stamp Office in cases where there may be some doubt about the claim in order to ensure that HMRC are kept fully informed.
If you have already purchased the property and think that with hindsight mixed use should have been claimed then it may be possible to claim a refund and you can read my guide on this here [insert link to my SDLT Refund blog].
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