Changes to SDLT surcharge on purchases | KPMG | UK

Changes to SDLT surcharge on purchases of additional dwellings

Changes to SDLT surcharge on purchases

The changes exclude granny annexes and dwellings purchased using alternative finance arrangements from the SDLT surcharge.


Associate Partner, Head of Stamp Taxes



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Finance Bill amendments have been tabled to give effect to Government assurances that two types of transaction that were inadvertently subject to the Stamp Duty Land Tax (SDLT) surcharge will be excluded from the surcharge with retrospective effect.

A summary of these amendments, which can be found here – (from page 29), are detailed below.

Granny annexes
Under the current legislation, an individual acquiring a dwelling that contains a self-contained dwelling on the grounds could be subject to the SDLT surcharge (3 percent of the purchase price paid on top of the standard SDLT rates) as more than one dwelling would be acquired in the transaction. A new condition, condition C, will be inserted, with effect from 1 April 2016 according to the Explanatory Note, to clarify that a self-contained dwelling will not be counted as a separate dwelling if it is a ‘subsidiary’ to another dwelling. A dwelling (Dwelling A) is a subsidiary to another dwelling (Dwelling B) if:

  1. Dwelling A is situated within the grounds of, or within the same building as, Dwelling B; and
  2. Determined on a just and reasonable basis, the chargeable consideration attributable to Dwelling B is two thirds or more of the chargeable consideration for all the dwellings purchased (including Dwelling A) within its grounds.

Note that an individual may still be subject to SDLT surcharge for the purchase of such a dwelling if they already own another dwelling and are not replacing a main residence.

The explanatory note to this amendment can be found here.

Alternative finance arrangements
Currently, the surcharge applies to acquisitions of dwellings by banks and other financial institutions providing alternative property finance (including Sharia’a mortgages). Such financing arrangements usually involve a financial institution buying the property and on-selling it or leasing it to an individual, the person receiving the finance. The amendments provide that the transaction under which the financial institution acquires the dwelling will not attract the surcharge if the conditions are met for SDLT alternative finance arrangement relief.

The explanatory note to this change can be found here.

Power to exclude transactions
Pursuant to the amendments tabled, the Government will also have the power to prevent certain transactions from being subject to the SDLT surcharge by amending the SDLT surcharge rules by regulation. This assists the Government in addressing any anomalies in the SDLT surcharge rules in their teething phase. The power will also allow some transactions to become subject to the surcharge where that is incidental or consequential to the exercise of the power.

The explanatory note to this change can be found here

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