Developers buying houses- watch out for the SDLT


Posted by John Shallcross, 29th September 2015

As buses often come in threes, so do the questions surrounding stamp duty land tax, or SDLT, I am asked.  I have encountered a few issues recently, where a development company has bought a site, including a house, potentially getting caught up in the penal higher rate provisions, designed to stop individuals from holding their home in a corporate wrapper.  The 15% rate of stamp duty land tax has been an issue in these cases, as part of the price one would apportion to the house, is over £500,000.

Although the legislation introducing the higher rate of SDLT was intended to catch those acquiring properties through companies for personal, or family occupation, there are some anomalies in the working of the relief’s from the 15% rate.  There is a relief where a company buys a house for development and resale in the course of a property development trade.  There are conditions however, and there can be a withdrawal of the relief (often meaning a further 11% SDLT to pay) if things change at any time, within three years after the purchase.

Examples of circumstances which can give rise to problems are the following:

  • Occupation of the house by a connected person, such as a substantial shareholder or members of the family
  • An opportunity coming up for an interim use of the house, such as when one of our clients was approached for the site to be used for a film set while they progressed the planning
  • A property being let, either before development starts or after it is completed
  • The house being sold, as it stands, when an unexpectedly good offer comes in
  • The house being used to accommodate the developer’s employees or as an office while work is done on other land the company is developing
  • The garden of the house being used as a site compound for the work done on other land the company is developing
  • The house is bought to be demolished and the site to be transferred to the local authority pursuant to planning obligations

It is best to be forewarned, as some of the traps can be avoided, with a little planning.

Enjoy That? You Might Like These:


articles

22 March - Sadie Pitman
Planning permission is required for the "carrying out of any development on land" pursuant to section 57(1) of the Town and Country Planning Act 1990 ("the TCPA"), with the definition... Read More

events

22 March - Rachel Gwilliam
We are delighted to invite you to the Society of Construction Law seminar at our Cardiff office on Wednesday 3 July 2019. This presentation discusses the Court of Appeal decision... Read More

articles

22 March - James Bessey
Our team was engaged within hours of the tragic Grenfell fire in 2017 and has since built up an enviable track record of supporting clients in this area. We have... Read More