Buying Residential Property in a Company attracts the Higher rate of Stamp Duty

Property investors in the UK will be well aware of the higher rate of SDLT payable on the purchase by individuals of residential property in the UK, where they have a "major interest" in another property. Introduced in April of this year in the 2016 Finance Bill, part of George Osborne's raft of property tax initiatives, seemingly targeted at the buy to let and foreign investor market. It also extends the higher rates of SDLT to corporate buyers, whether developing or investing.

The provisions apply whether the company is domicilled in the UK or offshore and are contained in Section 128(6)–10, which came into force in April and amends the Finance Act 2003 by introducing the following new Schedule:

Paragraph 4, Schedule 4ZA, Finance Act 2003 now provides that in the case of the purchase of a single dwelling:

A chargeable transaction falls within this paragraph if-

(a) the purchaser is not an individual,

(b) the main subject-matter of the transaction consists of a major interest in a single dwelling, and

(c) Conditions A and B in paragraph 3 are met.

Conditions A & B in Paragraph 3 Schedule 4ZA, Finance Act 2003 provides that :

(2) Condition A is that the chargeable consideration for the transaction is £40,000 or more.

(3) Condition B is that on the effective date of the transaction the purchased dwelling—

(a) is not subject to a lease upon which the main subject-matter of the transaction is reversionary, or

(b) is subject to such a lease but the lease has an unexpired term of no more than 21 years.

The above provisions effectively ensure that almost all purchases by companies fall within the higher rate of SDLT where they acquire a major interest in a property, the chargeable consideration is more than £40,000 and the property is NOT subject to a reversionary lease (i.e. a lease which takes effect sometime in the future) or if it is subject to such a lease, it has an unexpired term less than 21 years.

The higher rates that will apply are as per Part 1, Table A as follows:

“TABLE A: RESIDENTIAL

Relevant considerationPercentage

So much as does not exceed £125,000 3%

So much as exceeds £125,000 but does not exceed £250,000 5%

So much as exceeds £250,000 but does not exceed £925,000 8%

So much as exceeds £925,000 but does not exceed £1,500,000 13%

The remainder (if any) 15%”

Where two or more dwellings are purchased in a single or linked transaction multiple dwellings relief (FA2003/Schedule 6B) can still be claimed and where six or more dwellings are purchased in a single transaction the purchaser can choose whether to apply the non-residential rates of SDLT or claim multiple dwellings relief and pay the higher rates.

For further information on the Higher Rates of SDLT please refer HMRC's Guidance Notes: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/570876/SDLT_Higher_rates_for_additional_properties.pdf

The SDLT provisions are notoriously complicated and the above is only intended as a snapshot and general guidance on the SDLT rules currently in force. There are of course other tax implications when buying property in a company and some important changes also introduced in the 2016 Bill which affect buyers and sellers using off-shore vehicles, such as a BVI companies.

Lauriston Saggar LLP Solicitors provide an integrated conveyancing and tax advisory service to London developers, investors and HNW's and as part of the team, Im always happy to meet new clients for a free initial consultation. Don't hesitate to contact me, Lee Magner by emailing lee@lauristonsaggar.co.uk.

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