SDLT on Mixed Use Property

With Stamp Duty Land Tax (SDLT) charged differently on residential and non-residential property, the disposal of a mixed-use property can lead to tax consequences that may affect the value you receive on sale.

Recently, the Chartered Institute of Taxation and the Stamp Taxes Practitioners Group agreed new guidance with HM Revenue and Customs (HMRC) on the classification of property in some common cases where there is mixed use of the premises.

HMRC have decided that the prior guidance that if the property is marketed as residential, it will be a residential property for SDLT purposes should not apply. Instead the test will be if the property is used or suitable for use as a residential property at the date of sale.

If a building is demolished or derelict, it will not be regarded as being 'in use or suitable for use as a dwelling', and where such a building is being reconstructed, the position will be decided on the facts: the work has to be significant – there is no 'golden brick' rule.

Lastly, where there is a mixed residential/non-residential use, the SDLT status of the property will depend on the facts – a 'home office' will be residential, but a self-contained business office (e.g. a surgery) or area let separately is likely to be classified as commercial. The test here is whether an identifiable use of an area precludes use of that area for any other purpose.

Always take professional advice before putting a property on the market.