Who pays Stamp Duty Land Tax?

SDLT is generally charged on the actual consideration paid by the purchaser. A gift of property is normally exempt from SDLT. However, any assumption of debt by the purchase is treated as consideration given and SDLT is payable on the amount of the debt assumed.

Although there is no special exemption for property transfers between spouses or civil partners, they often avoid SDLT because they are pure gifts.

SDLT rates differ depending on whether the land or building being bought is for business or residential use. Where land and a house are bought together and part of the property is non-residential, the whole property is subject to a reduced rate of SDLT on purchase. If land is just part of the grounds of the dwelling house, the whole transaction is subject to the higher residential rate.

Where a farmer buys a farm with a dwelling on it, the farmer must prove to HMRC that there is an intention to carry on a trade from the property, in order to avail of the lower rate of SDLT. If the farmer cannot prove intention to carry on a trade from the property, the higher rate of SDLT is payable.

In a recent Tax Tribunal case, the Tribunal stated that the legislation required reasonable commercial plans to be in place. HMRC states that a property must be for mixed use before and after your purchase for the reduced rate of SDLT to apply. Land and buildings which are not necessary for the proper use and enjoyment of the residential property mean that it is a mixed-use purchase and the lower rate of SDLT applies. If you buy a home which includes animal paddocks or grazing land this can make the purchase count as grazing land and therefore liable to the reduced rate of SDLT.

In view of the significant rates of SDLT and in some cases, the opportunity to reduce the amount payable, a purchaser should consult carefully with solicitor and accountant before committing to buy to ensure that the lowest possible rate of SDLT applies.

For further information, contact (028) 8224 1515.