Stamp Duty Land Tax (SDLT) can add considerable cost to the purchase of an investment property, so investors are wise to look out for opportunities to make savings.
Student accommodation comes in several different forms, for example – halls of residence, purpose-built student flats or HMOs which are occupied solely by students. Depending on the nature of the interest being purchased it may be possible to take advantage of an exemption from the 3% surcharge for additional dwellings (if the type of student property can be classed as “institutional accommodation” for SDLT purposes), claim multiple dwellings relief (MDR) or apply the non-residential rates of SDLT if the property consists of 6 or more individual dwellings.
Looking at some numbers, if a student accommodation building was purchased by a company for £1,000,000, the SDLT liability could be (taking into account the current increase in the lower SDLT threshold which applies until 31 March 2021):
- £58,750, if the building doesn’t qualify as institutional accommodation
- £28,750 if it does qualify as institutional accommodation.
- £10,000 if it qualifies as institutional accommodation and consists of 5 separate dwellings
- £39,500 if it consists of 6 separate dwellings if MDR is not claimed and £10,000 if it is claimed.
As you can see from above, several possibilities need to be explored to establish the best SDLT outcome. There are subtleties to what can qualify as “institutional accommodation” and what is defined as a “separate dwelling”, as both will depend on the facts for each property.