Residential property is defined in the stamp duty land tax (‘SDLT’) legislation as a building that is used or suitable for use as a dwelling or is in the process of being constructed or adapted into one at the date the purchase of the property completes. Dwelling takes its everyday meaning (i.e., a building with facilities to eat, sleep or relax or the garden and grounds of a dwelling).

Non-residential property is anything that is not residential property for SDLT purposes. Typical examples would include office buildings, prisons and hotels. Residential property can attract SDLT of up to 19% in the UK. However, The top rate of SDLT for the purchase of non-residential property is currently capped at 5%.

It is important to note that non-residential rates of charge can also be applied to “mixed-use” properties, meaning that a significant reduction in SDLT can be achieved. If there is a genuine case for self-assessment that a property is mixed use, the higher and additional residential rates of SDLT will not apply.

Mixed-use property comprises residential and non-residential elements such as a farmhouse with grazing land or a dwelling with a shop, office building or industrial unit. Whilst the savings that can be achieved are substantial, case law and Stamp Office guidance indicate that the mixed-use property threshold is very high. Expert advice should be sought to ensure that the mixed-use self-assessment position is sustainable, and contemporaneous evidence should be obtained in the event of HMRC challenge.

If you have any queries about your SDLT liability, get in touch with one of our dedicated tax specialists, John Feaster and Kieran Berry.