Sunday February 20, 2011
Finance Act 2010 – SDLT and Residential Property for House Builders
In the Budget in 2010 the Chancellor increased SDLT to 5% for Residential Property transactions where the consideration was in excess of £1m. How do these changes affect house builders and other developers?
This change is brought into force in the Finance Act 2010 (with effect from 6th April 2011) which changes the rates for Residential Property in the Finance Act 2003. Accordingly, in order to ascertain what is meant by Residential Property one needs to look at the definitions in the 2003 Act.
In s.116 of the 2003 Act. Residential Property is defined as being:
(a) a building that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for such use, and
(b) land that is or forms part of the garden or grounds of a building within paragraph (a) (including any building or structure on such land), or
(c) an interest in or right over land that subsists for the benefit of a building within paragraph (a) or of land within paragraph (b);
and “non-residential property” means any property that is not residential property.
Additionally, where six or more separate dwellings are the subject of a single transaction involving the transfer of a major interest in, or the grant of a lease over, them, then, for these purposes, those dwellings are treated as not being residential property.
It should be noted that it is likely that even a building previously used as a dwelling (but not currently being constructed or adapted for residential purposes) which is in a dilapidated state and is, therefore, not capable of being used as a dwelling at the time of the transaction will probably fail the test and will not be regarded as Residential Property.
Accordingly, for very many house builder acquisitions, SDLT will remain at 4%. Where a developer is buying a site where there are existing buildings capable of being used as dwellings as well as other land the position will be more complicated and as these provisions have not yet become operative the situation will remain unclear for a time. It is certainly worthwhile taking further advice where a developer is buying land with this ‘mixed’ use and we will happily advise on a site by site basis and obtain an SDLT ruling if appropriate.
For more information contact Steven Scates.