When buying residential property (and assuming the property value is over £150,000), buyers are liable to pay stamp duty land tax (SDLT), whether at standard rate or at the higher rate – see below. SDLT is a self-assessed tax, which means that you (or your solicitor) must work out the total value of SDLT, based on the value of the land or the consideration paid for it and then that will then inform the amount of SDLT due. The total paid in respect of SDLT may also include another type of payment for example of goods, works or services, release from a debt or the transfer of a debt including the value of any outstanding mortgage.
Payment of SDLT for a property with a self-contained annexe or additional dwelling is something that requires detailed consideration when calculating SDLT which may be due. Generally, the higher rates of SDLT apply to purchases of residential properties (where there this will be a second home or buy to let for example). HM Revenue & Customs (HMRC) have however, clarified with a reference in a Talking Points webinar on 23 July 2019, that where relevant conditions are met, multiple dwellings relief may in fact, be claimed without incurring a higher rate of SDLT (known as a 3% surcharge).
HMRC have clarified to an extent, as follows:
“In a situation where one of the dwellings being acquired is subsidiary to another of the purchase dwellings (often referred to as an annexe) the higher rates may not apply but multiple dwelling relief may still be claimed if the purchase meets the qualifying conditions. A dwelling is a subsidiary dwelling if it is within the ground of or the same building as the main dwelling and the chargeable consideration when apportioned on a just and reasonable basis for the subsidiary dwelling is no more than a third of the chargeable consideration for the whole transaction. To clarify: where an individual buys a property which includes a subsidiary dwelling, multiple dwelling relief could be claimed if the qualifying conditions are met and the higher rates won’t apply unless they are triggered by other property that the individual already owns”.
It is therefore very important if when buying residential property with subsidiary dwellings such as annexes, that you speak to your advisor as quickly as possible to understand any higher rate / surcharge which may be payable and conversely also, any relief which may be applicable. Fisher Jones Greenwood are able to help you with this. If you require further information on the above, please contact us by calling 01206 700113 or email [email protected]. We also have links to tax advisors who can assist in complex areas.