Stamp Duty Land Tax

[Peacock10]

Hi all,

I'm new on here and just wanted a bit of advice. We bought a residential property through our limited company with the intention of building two houses on the land at the bottom of the garden, renovating the property and selling all three properties on. We did sell the two new builds but decided to buy the property for ourselves. We sold our main residence and then bought the property from our limited company at market value and moved in. I thought we only needed to pay 3% SDLT but HMRC have said we need to pay 15% as "non-qualifying individuals have been permitted to occupy the property". Has anyone else come across this or know if this is correct? Thanks for any help.

 

[Solvelaw]

These were anti avoidance provisions to prevent subsequent sale of the company holding the property for only 0.5% Stamp Duty on the shares.
Unfortunately it looks like you have fallen into the trap, as the non qualifying individual is quite wide and can catch wider family members. We have a tax specialist who might be able to shed more like on this aspect to see whether you could challenge this in some way and naturally you have to consider those costs versus paying the additional uplift being demanded by HMRC.

 

[Amelie69]

It appears that HMRC has determined that the property purchase is subject to the higher rate of 15% SDLT because it was initially purchased by the limited company for the purpose of development and subsequent sale, and was later sold to non-qualifying individuals who now occupy the property. This may be due to the rules around the higher rates of SDLT for companies and the restrictions on claiming reliefs when transferring properties between companies and individuals. It may be advisable to seek professional advice from a tax specialist or solicitor to determine the best course of action.

 

[UK Contractor Accountant]

Think HMRC may have got the wrong end of the stick with this one - the 15% rate applies to non-natural persons (i.e company) buying the property and allowing the Director(s) to occupy the property.

You have not occupied the property as a non-qualifying individual whilst the property has been in the company's ownership. The property has been purchased at market value in the course of the company's development/building trade and it is only after the sale has been completed you have moved in and occupied the property.

The exceptions from the 15% higher rate charge are withdrawn if:
- within three years of the effective date of the relevant transaction, the conditions for exception in 1. to 9. above cease to be met; or
- in the case of the exceptions in 1. to 4. above, the property has been acquired with the intention that a non-qualifying individual will be permitted to occupy the dwelling. A non-qualifying individual is defined widely and in the case of a company includes a director of that company, that director's spouse or any person related to either of them.

There is no stamp duty avoidance at play here as the subsequent sale by the company is at arms length and considered as part of its trading activities.

Might be worth getting this checked out by a Stamp Duty expert.

 

[UK Contractor Accountant]

Higher rate for non-natural persons

Sch 4A FA 2003
A special higher rate of 15% applies to purchases of interests in a dwelling by non-natural persons where the chargeable consideration exceeds £500,000 and no exception applies. Non-natural persons for these purposes are companies, collective investment schemes and partnerships with at least one partner that is a company or collective investment scheme. Although a limited liability partnership (LLP) is a body corporate it is treated as a partnership.

Where the 15% higher rate applies it is charged on the entirety of the chargeable consideration.

The 15% higher rate also does not apply where the property is:

1. acquired exclusively for use in a property rental business;
2. acquired exclusively for the purpose of development or re-development and resale in the course of a property development trade;
3. acquired exclusively as a part exchange for resale in the course of a property development trade;
4. acquired exclusively for resale as the stock of a property trading business which consists of or includes activities in the nature of a trade of the buying and selling of dwellings;
5. acquired by a financial institution in the course of lending;
6. a dwelling acquired for use by employees;
7. acquired on or after 3 March 2021 by a qualifying housing co-operative (including an acquisition via an alternative property finance arrangement used to satisfy the requirements of Shari'a law);
8. acquired with the intention (and reasonable commercial plans have been formulated to carry out that intention) that it will be exploited as a source of income in the course of a trade by offering the public the opportunity to make use of, stay in or otherwise enjoy the dwelling on at least 28 days in any calendar year eg a stately home;
9. a farmhouse.