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Dwell on Dwellings

Caroline Fleet, Partner, Tax
27/03/2019
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Given the huge differential in rates between residential and non-residential transactions for Stamp Duty Land Tax (SDLT) purposes (10% at the top end of the ranges), determining whether there is a dwelling involved in the transaction is often fundamental in ascertaining the level of SDLT due.

The existence of a number of dwellings can also be very beneficial in that Multiple Dwellings Relief (MDR) may be available (either as part of the same transaction or as a linked transaction) or that the commercial rates of SDLT may be available where six or more dwellings are acquired under the same contract. MDR does have a number of conditions applied to it as well as a three year potential clawback period. Depending on the purchase it may also be necessary to consider whether a qualifying subsidiary dwelling exists, which could alter the impact of the 3% higher rate charge, for SDLT purposes.  

There is no statutory definition of what is a dwelling for SDLT purposes, and therefore the normal everyday meaning of the word should be applied. A recent First tier tribunal case, Bewley (TC 06951) looked at whether a run-down derelict bungalow should be considered to be a dwelling for the purposes of the residential rate and in particular whether the bungalow was ‘suitable for use as a dwelling’ at the time of its acquisition, so that as HMRC contended, the residential rates of SDLT were due. Given the dated internal facilities, lack of heating and the existence of asbestos, the tribunal held that although 'no doubt a passing tramp or group of squatters could have lived in the bungalow', the property should in fact not be considered to be residential and therefore liable to the lower non-residential rates of SDLT.

Determining the existence (or not) of a dwelling is essential in calculating the SDLT due. Unfortunately, in our experience the potential availability of MDR as well as Qualifying Subsidiary dwellings are often overlooked in transactions, so that taxpayers may well be paying too much SDLT. On any transaction it is therefore always worth raising the question about whether there are any dwellings being acquired and if so how many.

For further details regarding SDLT or other property tax matters, please contact Caroline Fleet or your usual Crowe contact.

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Caroline Fleet
Caroline Fleet
Partner, Tax
London