​HMRC clarifies definition of 'Residential Property' for Stamp Duty Land Tax (SDLT)

​HMRC clarifies definition of 'Residential Property' for Stamp Duty Land Tax (SDLT)

The Chartered Institute of Taxation and the Stamp Taxes Practitioner Group have published a summary setting out HMRC's view on the meaning of 'residential property' for Stamp Duty Land Tax (SDLT) from a meeting held on 11 June 2018 (published 4 July 2018).

This seeks to clarify current difficulties surrounding the main statutory definition in s.116 of the Finance Act 2003 and the associated HMRC guidance, namely that the plurality of definitions have led to uncertainty on exactly what type of properties should be subject to Stamp Duty Land Tax (SDLT) at residential rates.

For example common terminology such as 'garden or grounds' has caused particular difficulties in interpreting s.116(1)(b) Finance Act 2003 'land that is or forms part of the garden or grounds of a building', especially in light of the supplemental 3% SDLT charge on additional residential property.

The distinction between residential and non-residential transactions is increasingly important as a result of the significant difference between Stamp Duty Land Tax (SDLT) charged on residential and non-residential property, as well as the introduction of penal Stamp Duty Land Tax (SDLT) rates on certain transactions involving residential property.

Among other things, HMRC have clarified the following important points:

s.116(1)(b) Garden and Grounds sold separately (without the dwelling)

  • A separate sale of a garden is a residential property transaction irrespective of whether the garden has been fenced or walled off or not.
  • A subsequent sale of the garden by the purchaser may be non-residential if there is no building within s.116(1)(a) on the land.
  • The separate sale of a garden is not subject to the supplemental 3% charge.

s.116(7) 'Six or more' rule

  • A 'single transaction' means a single contract rather than a single land transaction, regardless of the fact that completion may take place at different times for properties under the contract.
  • The sale of six or more flats under a single contract with completion at different times is, therefore, a single transaction for the purposes of s.116(7) and is not treated as residential.

For more information on the definition of 'residential property' please see the following summary published with HMRC's agreement.

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