Stamp Duty Land Tax: The impact of the higher rates

1 April 2016 saw the introduction of a 3% increase in the rates of SDLT on purchases of additional dwellings. These changes were announced as a measure to target private investors buying second homes or buy-to-let properties. However, the implications run much wider than this.

Broadly speaking, the higher rates apply when all the following four conditions are met:

  • the new dwelling costs £40,000 or more,
  • the new dwelling is not subject to a lease which has more than 21 years left to run on the date of purchase,
  • the purchaser owns an interest in another dwelling which has a market value of £40,000 or more and is not subject to a lease which has more than 21 years left to run at the date of purchase of the new dwelling
  • the dwelling being purchased is not replacing the purchaser’s only or main residence.

Where there are joint purchasers, the four conditions above must be tested against each of them individually. If any of the purchasers ‘pass’ all four tests, the whole of the purchase price is subject to the higher SDLT rates.

What does this mean for farming businesses that may typically hold a farmhouse and perhaps accommodation for farm workers? Will the farmer’s children or grandchildren have to pay higher SDLT rates when purchasing their own homes because they have a stake in the farm? The good news is that in most cases they will not, although the type of vehicle through which the business is run will be a factor.

Partnerships are treated as transparent for SDLT. This means that the partners are all deemed to own an interest in the partnership property. In theory, this could cause problems for a silent or junior partner who is looking to buy their own home away from the farm. Fortunately, a partner purchasing a dwelling in a private capacity is able to ignore any property owned by the partnership when considering the four conditions for the higher rates of SDLT. However, this is only the case where the partnership is carrying on a trade and the partnership property is used for the purposes of this trade. As HMRC has stated that a property letting business is not a trade, any farming partnership that lets unused residences outside of the farming business should seek further advice.

It is worth noting that the reverse is not true – residential property held privately by individual partners cannot be ignored when the partnership purchases a dwelling. There will be relatively few instances where a farming partnership is able to buy a new dwelling without paying the additional 3% surcharge.

If the farm operates through a company, the rates of SDLT applicable to the shareholders’ individual purchases will not be ‘tainted’ by any property owned by the business. As the company has its own legal personality, the shareholders are not treated as owning its property. However, companies always pay the higher rates of SDLT when acquiring dwellings.

The introduction of the higher rates has added additional complexity to an already difficult area. It is essential to seek advice on the SDLT implications before purchasing a new property.

If you would like any further information, please contact Sarah Davis, who is an Assistant Director within the VAT department at PEM, on 01223 728300; email 


Sarah Davis

Assistant Director, VAT
I am the Assistant Director of the VAT department at PEM. I am a Chartered Tax Advisor with 15 years experience in VAT. I advise a broad range of clients and professionals, covering most aspects of VAT. My main area of expertise is property and construction and I also advise on Stamp Duty Land Tax (SDLT) and the Annual Tax on Enveloped Dwellings (ATED).

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