By Phil Kinzett-Evans
In a recent stamp duty land tax case, the founder of GÜ desserts was found to have erroneously made a claim that his £3m property, including a road, was non-residential in nature on the basis that the neighbouring farmer used the road for commercial purposes. Tax relief of £120,000 was denied.
HMRC define residential property as:
- a building used or suitable for use as a dwelling or in the process of being constructed or adapted for use as a dwelling.
- The garden or grounds of such a building including structures in the garden or grounds.
- An interest or right in or over land that benefits a dwelling. This would tend to mean a right of way to access the dwelling.
Any property which does not fall into any of those three categories will be non-residential.
In this instance, the boutique advising Mr Averdieck was found to have stretched the interpretation of non-residential land too far, with Judge Ann Scott saying: “Whilst I accept that the farmer’s business is a commercial operation, it is conducted on his farm. It is no more conducted in the lane than it is on the main road.
There are many uses of the phrase ‘dwelling’ in the tax legislation and determining what is or isnt residential land can be difficult. Currently, where a transaction has any non-residential element then the rates under that table apply to the whole transaction. This has led to many owners attempting to classify their properties as non-residential beyond what HMRC will accept, and sometimes with the advice of so-called ‘specialists’ who have sent an unsolicited letter to a purchaser suggesting they can reduce the amount of SDLT paid.
HMRC is cracking down on this and spurious attempts to obtain Multiple Dwellings Relief, for example, by stating that a bedroom is a studio flat and dwelling in its own right!
If you are unsure whether the residential or non-residential rates apply to your transaction, or if you are buying more than one property, then please do contact us via our form – our experienced tax team will be very happy to advise you appropriately.
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