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The SDLT headache isn’t just limited to the additional rate

In recent newswires we have talked about the Stamp Duty Land Tax (SDLT) headaches that the additional rate has brought in. However, this is not the only issue that buyers should beware of. SDLT legislation is complex and the Government have closed many a loop hole!

There are intricate rules on linked transactions and also where there is mixed use. Different rates of SDLT apply depending on whether a property is residential or commercial, but what happens where there is both, such as a shop with a flat above it?  More importantly for some of our clients, how do the linked transaction rules apply if you would like to transfer, say three of your properties from your personal portfolio, into a company? This is a classic example of when advice from the offset is so important.

Linked transactions

The legislation around “linked transactions” was brought in to stop people splitting up transactions to obtain lower SDLT rates.

The rules affect transactions that are made between the same seller and the same purchaser, including dealings with “connected” persons with the purchaser or seller.

All of the circumstances of each sale should be taken into account when determining whether or not transactions are linked. It is not necessarily based on time or the type of assets. Each circumstance is looked at on its own facts. If sales take place within a short period of time this is a strong indication of linked transactions, but not conclusive. If the items are different types of assets, this may look as though the transactions are not linked, but again, this may not be the case.

In essence, if the series of single transactions between the same seller and buyer are part of the same deal or arrangement, the transactions are likely to be considered as linked.

This circumstance of linked transactions is very common where a client has a personal property portfolio and decides to transfer part of that portfolio into a company.

SDLT is usually charged on actual consideration, therefore if there is no consideration, there is no SDLT. The exception to this rule is where an individual transfers a property from their own portfolio to their own company. SDLT would be charged on the market value as the “consideration”.

The individual may try to transfer each property separately and over a large period of time. However, as the purchaser and the seller are the same each time and the transfers could be seen as the same economic arrangement, HMRC could very well see these transfers as linked and so charge a higher rate of SDLT on the later transfers. From 4 December 2014, the SDLT on linked residential property transactions is calculated by aggregating the separate “consideration” for each linked transaction – this gives the relevant consideration.

To further complicate the rules, it may be possible to claim for multiple dwellings relief (MDR) to lessen the harshness of the SDLT payable on linked transactions of residential property. It basically averages it out over the transactions.

These rules will be very important to look at if you have set up a company to transfer properties into or if you are going to in the future. It is of particular importance if your first properties were transferred in before the 3% additional rate was introduced as there is a potential for any further transfers to be considered as linked and the additional 3% being applied to the aggregate of the “consideration”.

Mixed use

Rates and bandings vary between residential property and non-residential property, to the advantage of non-residential property. Non-residential property includes:

  • commercial property, e.g. shops or offices
  • agricultural land
  • forests
  • any other land or property which is not used as a residence
  • 6 or more residential properties bought in a single transaction

A ‘mixed use’ property is one that has both residential and non-residential elements, e.g. a flat connected to a shop or office, and these properties pay SDLT at the non-residential rate.

The bands and rates are as follows:

Band: market price £ Residential
0- 40,000 0%
0 -125,000 0%
125,001 – 250,000 2%
250,001 – 925,000 5%
925,001 -1,550,000 10%
1,500,001 and over 12%


Band: market price £ Non-residential
0-150,000 0%
150,001 – 250,000 2%
Over 250,000 5%


SDLT is applied to each element falling into each bracket as opposed to the slab system that was in place until 4 December 2014 for residential property and 17 March 2016 for non-residential and mixed use.

As commercial rates on higher value properties are a lot lower than those applied to similarly priced residential properties, it is possible to make significant savings by claiming mixed use. A successful mixed use claim has become more important since the 3% additional rate was introduced. For example, where a second home is purchased, the surcharge is applied to the whole transaction, so a farmhouse purchased with separate cottages could be subject to the 3% surcharge unless you can prove that the property includes non-residential elements, such as farmland or commercially let units.

There can be uncertainty about what qualifies as mixed use. Residential properties relate to the dwelling and the gardens and grounds, unless such land is considered to be outside the “curtilage” or amenity of the dwelling. So if additional land such as paddocks, or fields treated as pasture or farmland, are purchased with a farmhouse, it may be possible to claim mixed use and hence pay lower SDLT rates. Whereas, an estate consisting of a manor house with parkland might not qualify for mixed use rates if HMRC consider the parkland to be for the amenity of the house.

Each transaction needs to be considered on a case by case basis and it is down to the buyer to prove mixed use. This is another reason why it is important to get advice before any transactions are entered into.


If you need any advice on SDLT contact us sooner rather than later for a free no obligation quote.



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