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HMRC internal manual

Stamp Duty Land Tax Manual

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:

Withdrawal of relief - businesses of letting, trading in or redeveloping properties FA03/SCH4A/PARA5G

Withdrawal of relief will occur where one of the following conditions is not met within the three year period beginning with the effective date of the acquisition

  • the higher threshold interest is held by the purchaser for one of the businesses of letting, trading in or redeveloping properties,
  • any chargeable interest derived from that higher threshold interest is held by the purchaser for one of the businesses of letting, trading in or redeveloping properties, and
  • no non-qualifying individual is permitted, by the purchaser, to occupy the dwelling.

 

Withdrawal will also occur if, during the control period, the activities in relation to the business have not yet begun, or the business has ceased, and reasonable steps are not being taken to ensure that the property acquired is to be actively used in the business.

So, for example, where a dwelling is acquired for a property rental business and is not generating rents at the date of acquisition, the purchaser will still be able to pay SDLT at the standard rates if it takes reasonable steps to rent the property out. The sorts of activities that would constitute steps for these purposes would include

  • appointing a lettings agent,
  • re-decoration,
  • more substantial alterations than simply re-decoration, and
  • purchasing furniture.

 

However, those steps must be reasonably expected to lead to the letting of the property. For example, if the dwelling is located in Knightsbridge, advertising it in Newcastle will not meet the test of steps being taken to find a tenant. Similarly, advertising the property at a rent that is unlikely to be achieved will not meet the test.

Withdrawal will apply in all cases where a non-qualifying individual is permitted to occupy the property, even where the individual pays a market rent to the owner.