Budget Explained – Changes to Stamp Duty Land Tax rules on bulk acquisition of residential properties

accawebmaster —  24 March 2011 — 6 Comments

By ACCA’s Budget team

The Chancellor has announced changes to Stamp Duty Land Tax (SDLT) for transactions which involve the purchase of more than one residential property in order to promote property investments and increase rented housing supply.

Under current rules when more than one residential property is acquired in a single transaction, or in ‘linked transactions’ between the same purchaser and vendor, the rate of SDLT applicable is established by adding together the amounts paid for all the properties. That means that a purchaser acquiring more than one property can pay a higher rate of tax than somebody acquiring just one, even though the individual price of the properties could be the same.

The measures announced in the Budget will provide a relief where a transaction, a scheme, or a series of linked transactions involves more than one residential property. The relief, which will need to be claimed in a land transaction return, will allow the determination of the applicable SDLT rate on the basis of the mean consideration paid, which is given by the aggregate consideration divided by the number of dwellings. The minimum rate of tax is however set at 1%, i.e. even if the mean value of the properties acquired is below £ 125,000 the rate of 1% will apply to the aggregate consideration.

In addition, under current legislation, where a single transaction involves six or more dwellings, those dwellings are treated as non-residential property for SDLT and subject to different rates of tax. Under the announced relief, all the residential properties part of a single transaction or of linked transactions will be treated as residential properties for SDLT purposes, regardless of how many are involved.

The relief will not apply to non-residential property and therefore the applicable tax rate will continue to be determined by reference to the aggregate consideration. Where both dwellings and non-residential properties are included in a transaction or series of linked transactions, the dwellings will be able to benefit from the relief while the consideration paid for the non-residential property will be subject to the rate of tax determined by the aggregate consideration for both residential and non-residential property.

Full ACCA Budget comment here

 

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