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  • Tax

    Additional 3% SDLT on commercial property?

    I thought I had a good grasp of the basics of SDLT ( and LBTT and LTT) but now I'm not so sure.

    My understanding was that a mixed use property, such as a shop with flats above, was not subject to the additional 3% charge. I also understood that a commercial property sold with planning consent for conversion to residential was not subject to the additional 3%.

    Now I am trying to read and understand the HMRC SDLT Manual and it seems to indicate the opposite applies for a non natural person, i.e. Ltd Co. Hopefully I've misunderstood what I've read, can anyone confirm?

    "A dwelling is defined for the purposes of the higher rate charge as a building, or part of a building, that is suitable for use as a single dwelling, or is in the process of being constructed or adapted for such use."

    https://www.gov.uk/hmrc-internal-manuals...sdltm09520

    https://www.gov.uk/hmrc-internal-manuals...sdltm09525

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    I believe if it just has planning it is not in the process of being constructed or adapted.

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA

    Thanks Debbie,

    This tax man is a wily character!

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    Had a client buying bare land with planning permission via a company and the Solicitor was going to charge residential SDLT with the extra 3%!

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA

    You might need to employ a valuer to apportion the purchase price you paid between the commercial and domestic properties to enable SDLT to be applied correctly.

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    If it is not residential then commercial rate applies. Either one or the other. No apportionment.

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA

    I completed on a freehold shop with 2 self-contained 1 bed flats in November and there was no SDLT surcharge as it is classed as non-residential for this tax.

    When I sell it, however, the price will have to be apportioned commercial/residential for CGT at 10 or 20% (com) and 18 or 28% (resi).

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    spot on

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA

    That's my understanding if purchasing in your own name.

    However, if I understand correctly, purchasing the same property as a company would attract the SDLT surcharge and residential rates.

    There would be no CGT to pay when selling but there would be Corp Tax on any gain.

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    This is your get out. Same for individual or company purchase

    provided that, at the effective date of the transaction, the property is otherwise suitable for use as a dwelling or is being adapted for such use.

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA