4 things you never new about SDLT

Q1: My daughters are buying 2 new flats next door to each other in a development in Putney for £550,000 each. My solicitor says that because the purchasers are connected as siblings and they are both buying from same vendor, the SDLT has to be worked out on the combined purchase price of £1,200,000 rather than 2 separate calculations of £600,000 due to the linked transactions legislation. This increases the total SDLT from £17,500 each, or £35,000 in total to £53,750, an increase of £18,750 over what I expected. Can you help me?

A: Yes. Although the transactions are linked, your daughters can claim multiple dwellings relief under FA 2003 section 58D. As a result of this relief the consideration for each transaction is £1,100,000/2 = £550,000 with SDLT calculated at the Table A rates of FA2003 s55, so £17,500 each, subject to a minimum overall charge of 1% or £5,500. Therefore, the charge is £17,500 per transaction. The multiple dwellings relief should be claimed in the land transaction return using code 33.

Q2: Last year my family investment company purchased a residential property for £595,000 and has refurbished it extensively for resale. It has been up for sale now for a couple of months without success, and due to the current depressed state of the property market I am intending to rent it out to my son for a few months. Can you see any problems?

A: Yes. The default rate of SDLT for a purchase of residential property by a company is 15%.

There are various reliefs from the default rate e.g. where the property is to be used for a property rental business or in a property development trade, and you claimed this relief when you purchased the property so that the usual lower rates were applied, plus the 3% surcharge. You paid a total of £37,600 SDLT. However, if the property is occupied by a connected person at any time in the 3 year period after acquisition by the company, even for just one night, then the relief is clawed back and the default rate of 15% applies. This is a major trap and will result in additional SDLT payable of £51,650. There are also benefit in kind and ATED charges to consider, but the additional SDLT on its own renders the proposal a disaster.

Q3: My daughter would like to buy her first home, a small long lease flat in Raynes Park at a price of £310,000, and she is able to raise a 35 year mortgage of around £200,000. My wife and I will be guaranteeing the mortgage and we believe that it is prudent if one of us takes a 15% share of the purchased, long leasehold property with our daughter having 85%. Do you see any problems?

A: Yes. The problem with you or your wife taking a 15% share is that then the purchase will not be eligible for the first time buyer SDLT relief and it will also be subject to the 3% SDLT surcharge because your share of the value of the property is worth more than £40,000. Structuring it in this way will cost a total of £14,800 SDLT. If neither you nor your wife have any share then the purchase would only be subject to £500 SDLT assuming that your daughter qualifies as a first time buyer under those rules. So there will be additional SDLT of £14,300 if you proceed with your suggestion to hold 15%.

Q4: My solicitors prepared and sent me SDLT documents in relation to the completion of 2 commercial properties I have purchased at auction from the same buyer. My solicitors say the total SDLT to pay is £58,275 as both purchases are essentially identical transactions so they will count as “linked” for HMRC purposes.  This has increased my expected SDLT by £10,500. Can you help?

A: Yes. HMRC have confirmed that a purchaser acquiring two properties at an open bona fide auction in separate lots from the same vendor will not be treated as carrying out linked transactions. Your SDLT should be recalculated using the rates for 2 separate unlinked purchases and will be £10,500 lower.