Here I explain how SDLT on mixed-use property works, how SDLT is calculated and how the mixed-use claims process works in SDLT.

What is a mixed-use property?

First, why is this important? Whether the purchase of a residential property with a large area of land is classed as entirely residential or of mixed residential and non-residential land can make a huge difference in the rates of stamp duty that apply to your purchase. For example, on the purchase of a house with land for £5m the saving in stamp duty will be up to £521,750 if the land is classified as mixed use so that the rates in Table B apply compared with the rates of SDLT charged under table A. In effect, mixed-use land is taxed at the same rates of SDLT as for stamp duty on commercial property.

Whether land is residential or mixed-use property for SDLT purposes depends on a number of factors including the size of the residence, the nature of the land, whether there is commercial use on a part of it and whether all of the land can be regarded as being “of” the dwelling.

In 2018, HMRC quietly changed its approach to stamp duty land tax on mixed-use property, making it much more difficult to claim the Table B rates of SDLT instead of the higher Table A rates that apply to purely residential property, and ignored their then published guidance on SDLT.

In June 2019, HMRC updated its published guidance on the meaning of ‘garden or grounds’, making its previous SDLT guidance irrelevant. 

I wrote an article for Taxation Magazine on HMRC’s revised guidance as a follow-on from my 2018 article on HMRC’s change of practice.

HMRC now argue that for SDLT the garden or grounds comprises all land included with a residential purchase and is residential unless there is positive business use before and after the purchase. This is not correct, and not all land associated with a residential purchase will necessarily be classed as residential as shown in the shown in the Guerlain – Desai decision.

Even if there is business use HMRC may still argue that the building remains suitable for use as a dwelling and so remains a residential property as in the Tretyakov appeal.

SDLT rates for mixed use property

The rates of stamp duty for mixed use property are 0% up to £150,000, 2% on the slice between £150,000 and £250,000 and 5% on any amount above that. The higher rates of up to 17% on a residential property do not apply even to the residential element of any mixed-use purchase ie there is no apportionment of the price for stamp duty purposes between the residential and the non-residential parts.

HMRC’s guidance on mixed use property

The guidance is at SDLTM00440 to SDLTM00480 but should be viewed critically as HMRC’s view only and not accepted automatically as a correct statement of the law. You can read my thoughts on the published guidance here.

How claims work for mixed-use purchases

The SDLT return for the purchase of a mixed-use property is completed in a way that indicates to HMRC that the purchase is of mixed-use property for stamp duty purposes by using code 02 as the description of the property. See the SDLT return guidance here.

How Patrick can help with your claim 

I can assist you by advising you whether the property you are buying or have bought can properly be classed as mixed-use property and chargeable with the reduced rates of stamp duty under Table B. Your solicitor or conveyancer may understandably request the comfort of an opinion from Counsel confirming whether a mixed-use stamp duty claim can be made. Such an opinion will also help protect you from any penalties should HMRC later on disagree with the claim and assert that full stamp duty under Table A was payable. I can also assist you by drafting a disclosure letter to be sent to the Stamp Office in cases where there may be some doubt about the claim in order to ensure that HMRC are kept fully informed.

If you have already purchased the property and think that, with hindsight, mixed-use should have been claimed, then it may be possible to claim a refund. However many dodgy stamp duty refund claims firms operate in this space and you need to be very careful that you are not persuaded to allow them to make a refund claim when the facts do not justify a claim being made.

HMRC are currently prosecuting a number of stamp duty refund claims companies and their directors for making refund claims that were too good to be true and as a client you do not want to get caught up in that. If you wish to investigate whether a refund claim can be made you are much better off relying on an experienced tax barrister to advise you and if justified, make the refund claim for you.

Get in touch with Patrick today using the contact form below.