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HMRC internal manual

Stamp Duty Land Tax Manual

Introduction of the 5 percent rate for residential property

This rate applies for transactions where the effective date is on or after 6 April 2011. It is added to Table A within S55(2)/FA03. If the transaction completes an unamended contract made before 25 March 2010, or was substantially performed before 6 April 2011, then the previous 4 per cent rate will apply.

FA03/S116 sets out the statutory definition of residential property for SDLT purposes. Residential property is (FA03/S116(1)(a)) a building or (FA03/S116(6)) part of a building that, at the date of the relevant transaction, is one of the following:

* used as a dwelling
* suitable for use as a dwelling
* in the process of being constructed or adapted for such use

The definition includes (FA03/S116(1)(b)) land that is or forms part of the garden or grounds of a such building (including any building or structure on such land) and (FA03/S116(1)(c)) an interest in or right over land that subsists for the benefit of a building within (FA03/S116(1)(a)) or of land within (FA03/S116(1)(b)).

In most cases, the use of a room or area within a residence as an office will not cause it to fall into the mixed use category, as the room or area would still be suitable for use as a dwelling. Similarly, any indoor pool, gymnasium or similar feature, or an interest in a garage in a separate block, would still be residential as it contributes to the enjoyment of the residential premises. In all such cases the 5 per cent rate would apply for a chargeable consideration in excess of £1 million.

FA03/S116(2) specifies that buildings used for the following purposes are residential property:

* residential accommodation for school pupils (see [SDLTM29957](
* residential accommodation for students - other than a hall of residence (see [SDLTM29957](
* residential accommodation for members of the armed forces,
* an institution which is the sole or main residence of at least 90 per cent of its residents and is not excluded by FA03/S116(3)

If a building meets any one of these separate tests it will be treated as residential property, as will any garden or grounds belonging to it or any interests or rights attaching to it.

Where (FA03/S116(7)) six or more separate dwellings are the subject of a single transaction involving the transfer of a major interest in, or the grant of a lease over, them, those dwellings are not treated as residential property.

‘Garden or grounds’ includes land which is needed for the reasonable enjoyment of the dwelling, having regard to the size and nature of the dwelling. .This will usually be a question of fact depending on the individual circumstances of each case

It should be noted that a single land transaction is either within Table A or Table B. There is no apportionment between the two tables.