No relief for developers, the 3% SDLT surcharge
As promised by the Chancellor, the stamp duty land tax 3% surcharge on "additional" residential properties acquired will come into force on April 1 2016, but disappointingly residential developers have not been given a relief from this extra cost.
John Shallcross, leading real estate lawyer with national law firm Blake Morgan, said: “The details of this surcharge have now been announced and disappointingly the relief we had called for, which would particularly helped small to medium-sized housebuilders, is not there.
“In order to get the land needed to put a small development site together, developers sometimes need to buy a house, perhaps as an access for an adjacent site or for its large garden. Many believed that they should be exempt from this 3% surcharge in the interests of building much-needed homes. However, that is not the case and they are likely to be subject to the charge.
“This will add another layer of cost for small developers whose development incorporates an existing house.”
"The way the 3% surcharge is structured for an acquisition by a company means the surcharge can be due even if the company does not own another dwelling. So it would not help to set up a special purpose vehicle for the site and say that the property acquired is the only dwelling owned by that company.
"On the positive side, it seems that the charge is limited to "dwellings" as defined. Where one buys the house the garden is treated as part of the dwelling, but if a developer buys the garden without the house, the garden (whilst perhaps counting as "residential property") does not count as a "dwelling" and so escapes the surcharge.
"It is also clear that as expected "mixed property", such as a purchase from a seller of both his house and his field behind which has been in separate agricultural use, will escape the surcharge.