In 2012, a 15% Stamp Duty Land Tax (SDLT) charge was introduced to discourage the use of companies and other non-natural persons (such as partnerships with corporate partners) to avoid or reduce tax on residential property. This rate applies to residential property costing more than £500,000. However, there are some reliefs available to reduce the SDLT charge.
Reliefs available to reduce the SDLT charge
For instance, if the property is:
- used in a property rental business
- acquired for resale in a property development trade or property trading business
- used in a trade involving making the property available to the public on at least 28 days in the calendar year
- bought by a financial institution in the course of lending
- held to provide living accommodation for one or more qualifying employees
- a farmhouse to be occupied by a qualifying farm worker for the purposes of the farming trade.
In addition, there is a temporary relief on the 15% rate of SDLT for limited companies buying a dwelling to make it available to Ukrainian refugees under the Homes for Ukraine Sponsorship Scheme. The measure came into effect for transactions with an effective date on or after 31 March 2022.
The 15% rate is often considered unfair and disproportionate on the basis that it penalises legitimate businesses and investors who use corporate structures for genuine commercial reasons. On the other hand, some commentators think it is an effective way to prevent tax avoidance and evasion.
Final thoughts
SDLT is a complex area of tax law, and the specific circumstances of the purchase need to be looked at to ensure that it qualifies for relief. Seeking professional advice from a tax specialist is advisable.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
