Scope: when is Stamp Duty Land Tax (SDLT) chargeable: higher rate charge for acquisitions of residential property by certain non-natural persons FA03/S55/SCH4A: purchases of higher threshold interests with other chargeable interests FA03/SCH4A/PARA2
Where a transaction involves the acquisition of a number of chargeable interests, for example all residential property, a mix of residential and non-residential, or a mixed use property, FA03/SCH4A/PARA2 requires that the chargeable consideration must to be apportioned on a just and reasonable basis so that any higher threshold interests attract the 15 per cent higher rate charge and the normal charging rules are applied separately to the remaining interests.
This covers situations where, for example, a single transaction (the ‘primary transaction’) includes the acquisition of a large dwelling with a value exceeding the higher rate threshold and a second dwelling worth less than the higher rate threshold. It also covers the acquisition of a mixed use property which includes within it a dwelling with an apportioned consideration which exceeds the higher rate threshold.
In this situation the higher threshold interests must be treated as a separate transaction from the other interest(s) acquired at the same time and from the same person. The taxpayer is required to make two returns, the first in respect of the acquisition of the higher threshold interest and the second in respect of the acquisition of the interest(s) that are not higher threshold interests.
The acquisitions are not treated as linked transactions and the amount of tax due in respect of the acquisition of the interest(s) that are not higher threshold interests will be determined by the chargeable consideration apportioned to those interests, not the chargeable consideration for the primary transaction.
Where a taxpayer acquires both higher threshold interests and interests in other dwellings, FA03/S116(7) (single transaction involving six or more dwellings treated as a non-residential transaction) will apply where the conditions are met for the primary transaction. However, the non-residential rate of SDLT will only apply to those dwellings that are not subject to the 15 per cent rate.
- On 1 January 2015 a company purchases chargeable interests in two dwellings for £600,000 and £400,000, respectively, from the same vendor. The interest in the first dwelling is a higher threshold interest and the other is not, so the £600,000 acquisition is charged at the higher rate of 15 per cent and the £400,000 acquisition is charged separately at the normal rates for a residential property transaction.
- An estate acquired by a company consists of a significant residential property and a large area of moorland. The total consideration is £5 million. The cost attributable to the dwelling is £2.5million. The higher rate charge applies to the dwelling and the appropriate non-residential rate (4 per cent) to the remaining land acquired.
- On 1 June 2014 a company purchases a chargeable interest in a dwelling for £1 million. At the same time, and in the same transaction, it purchases five other dwellings each with an attributable cost of less than £500,000. The £1 million acquisition is a higher threshold interest so the 15 per cent higher rate applies and this acquisition must be returned separately. The acquisition of the five other properties is charged at the appropriate non-residential rate (4 per cent) as the primary transaction includes six or more dwellings.