If your property business employs staff, then you need to start preparing for some potentially big...
The Society of Trust and Estate Practitioners (STEP) has highlighted HMRC’s recent proposals to change the rules for calculating SDLT in relation to:
- Mixed purchases combining residential and non-residential property
- Purchases of numerous dwellings at a time, occasioning a claim to Multiple Dwellings Relief (MDR)
HMRC published a Consultation Paper at the end of November 2021: Stamp Duty Land Tax: Mixed-Property Purchases and Multiple Dwellings Relief which sets out to deter some of the ‘abusive’ claims it has encountered recently (as arguably evidenced by the number of – largely unsuccessful – recent FTT hearings for MDR). Nothing so obvious as reducing the overall charge to residential SDLT, of course, which can now reach the nosebleed-inducing heights of 17% of the transaction value, but instead, HMRC is considering:
Mixed-use acquisitions:
- Apportioning the consideration so that the residential element would be chargeable at residential rates, or
- A minimum threshold of non-residential value, before the (much lower) commercial rate would be applied to the whole consideration
Multiple Dwellings Relief:
- Allowing MDR only when the dwellings are being acquired for a business purpose, such as to let or develop
- A minimum threshold value of at least one-third of the total consideration allocable to any ‘second’ dwelling
- Allowing MDR only when acquiring at least 3 dwellings, rather than 2
While the STEP article does not mention this, it is perhaps surprising that HMRC is so keen to develop anti-avoidance legislation when it has been so successful at tribunal. Of course, we do not know how many cases HMRC has decided not to take that far – but surely it would demur only when satisfied that such cases were, in fact, in accordance with the law?
In particular, it is worth noting that, the main thrust of the current SDLT regime is to apply the residential rate(s) only when the acquisition is wholly residential in nature. One might reasonably infer that the residential rate should therefore be used only sparingly outside of ‘vanilla’ domestic purchases, rather than ‘wherever possible’ as HMRC now seems to prefer. Likewise, the MDR regime knowingly caters for ‘annexe’ or ‘granny-flat’ scenarios which would now be at risk under the latter 2 proposals for MDR. I find myself wondering, and not for the first time if perhaps it is HMRC itself that causes the biggest headaches when it comes to tax avoidance.
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