Partner Luke McMath, in our Residential Property team, is a member of the Stamp Taxes Practitioners Group. He comments on the complex area of Stamp Duty Land Tax (SDLT) for properties with a separate annexe.
We have recently been advising clients who have been purchasing a property with a separate area, wing or building. This is quite commonly an annexe where other family members have lived.
This is a complex area in terms of declaring the correct Stamp Duty Land Tax (SDLT) which is payable on such an acquisition. On top of the standard SDLT rules there are two additional factors which need to be considered:
- Whether an additional 3% SDLT is payable as a result of a change in the law bringing in a higher rate of SDLT for second properties.
- Whether the property could benefit from multiple dwelling relief (MDR) which typically greatly reduces the overall SDLT payable.
- Whether what is known as the “Granny Annex” exemption applies.
The correct result is highly dependent on the facts of the individual situations but can include:
- The “property” is for this purpose simply a single property and SDLT is payable on the purchase price in the usual manner.
- The “property” is treated as two properties for SDLT purposes and an additional 3% of SDLT is payable on the entire purchase price of “both” properties.
- Although the property would be treated as two properties for SDLT purposes, it falls within specific exemptions given for a granny annexe and similar separate areas and is treated as a single property for SDLT purposes and SDLT is paid in the usual manner.
- On each of the previous two cases, the property may or may not benefit from multiple dwelling relief. This is quite nuanced and can include whether there is a lockable door, a separate kitchen and/or bathroom or even whether there is sufficient privacy. Even if the relief is available it can be lost by further actions within the following three years. In some cases, special rules for mixed use properties will need to be considered. If six or more dwellings are being purchased then different options may also apply.
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This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.