HMRC has launched a consultation into the methods used to calculate Stamp Duty Land Tax (“SDLT”) on purchases of mixed-use property. A mixed-use property is where a property is considered as both residential and non-residential. In addition, there may also be a reform on multiple dwellings relief when two or more dwellings are purchased. HMRC considers that these two areas can lead to unfair outcomes, incorrect claims, or abuse of the rules.


Mixed property type

Currently, properties which include elements of residential and non-residential property are subject to the non-residential SDLT rates, which can give a substantial SDLT saving.

HMRC has said that some purchasers of property are taking advantage of the rules for mixed-use property, despite the property not having any relevant non-residential features. This enables purchasers to unfairly reduce the amount of SDLT paid. Therefore, the aim of this consultation is to amend the rules to ensure that they are fairer and reduce attempts to abuse the provisions of the relief.

In the consultation, HMRC is currently looking at introducing a new apportionment method for calculating SDLT on mixed-use property cases. This new method would mean that the residential portion of the mixed-use property would be taxed as a residential property with the remaining being taxed as non-residential property. An alternative option would be to introduce a threshold where a property can only be treated as a mixed-use property if the non-residential element of the property is more than a certain proportion, for example, more than 50%. HMRC is currently looking for views on this new method.

HMRC has said that if they were to use this method, they would need to ensure that the threshold would be high enough. This is to prevent purchasers from adding small amounts of non-residential land to class the purchase as a mixed-use property type and reduce their SDLT bill.


Multiple dwellings relief

Currently, if a property contains more than one dwelling there is an averaging method which can reduce the overall SDLT liability. There have been a number of cases on this recently where the tax-payer has tried to argue that an annexe is a separate dwelling and therefore the relief can be claimed. However, HMRC have been successful in many of these cases.

In order to reform multiple dwellings relief, HMRC has put forward a number of options.

  • Only allow multiple dwellings relief where all dwellings are purchased for a ‘qualifying business use’
  • Only allow multiple dwellings relief in respect of the dwellings purchased for a ‘qualifying business use’
  • Restrict multiple dwellings relief by introducing a ‘subsidiary dwelling’ rule
  • Only allow multiple dwellings relief for purchases of three or more dwellings

It will be interesting to see the outcome of these consultations.


How can we help?

At Hawsons we have a dedicated team of property & construction accountants at our offices in Sheffield, Doncaster, and Northampton.

Having an accountant who understands the challenges of this dynamic sector and is able to help you plan for the future is an advantage in a competitive environment. At Hawsons we have a great deal of experience in advising and helping businesses in property and construction and we can assist you as your business grows.

Free initial meeting

Stephen Charles

Tax Partner, Sheffield

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