High-value residential property transactions: potential 15% flat rate of SDLT

23 April 2021

The acquisition of a single dwelling situated in England or Northern Ireland for more than £500,000 by a non-natural person triggers a punitive 15% flat rate of SDLT, subject to potential reliefs.

What is a ‘non-natural person’?

A ‘non-natural person’ includes a company (and any other body corporate), partnerships (if at least one of the members is a body corporate) and collective investment schemes. The 15% flat rate for residential properties was introduced alongside the annual tax for enveloped dwellings (ATED) and the two regimes share a number of similarities.

What is a dwelling?

‘Dwelling’ takes its natural meaning in the SDLT regime. Therefore, where a property is used, or suitable for use, as a house or flat, or is in the process of being constructed, or adapted, for use as a house or flat, it will quite likely be a ‘dwelling’ for SDLT. The garden or grounds enjoyed with the dwelling are treated as part of the dwelling, as are interests over land that benefit the dwelling (such as a garage). The rules also explain which properties do not fall within the definition of dwelling; for example, hotels, halls of residence and care homes. The classification of a building, or its grounds, for SDLT is not always clear-cut, and we can advise you in this regard if you require assistance in reaching a determination.

How does the 15% flat rate interact with standard SDLT rules?

If a non-natural person acquires a dwelling and the consideration paid, based on a fair and reasonable apportionment of the total consideration, is over £500,000, the enveloped dwelling rules treat the acquisition of the dwelling as a separate transaction and apply the 15% flat rate to it. This can apply to the acquisition of a number of dwellings or the acquisition of a mixture of dwellings and commercial properties (for example a farm and farmhouse). The normal SDLT rule that treats the purchase of a mixture of commercial and residential land as non-residential does not apply in respect of the high-value dwelling unless a relief from the 15% flat rate applies. Similarly, a high-value residential property cannot be included within a claim for multiple dwellings relief when acquiring more than one dwelling as part of a single transaction unless, once again, a relief from the 15% flat rate applies.

What is the impact of the non-resident SDLT surcharge?

The non-resident surcharge is an additional SDLT charge that is payable on top of the applicable rate of SDLT by a non-UK resident who acquires a dwelling in England or Northern Ireland. The surcharge applies, for example, to individuals and companies and includes UK companies that are deemed to be controlled by non-UK residents. Overseas trusts and partnerships are also caught by the rules.

The non-resident surcharge adds 2% to the SDLT charge that would otherwise arise and could therefore result in a company, for example, having to pay SDLT at 17% when acquiring a dwelling if the 15% flat rate also applied.

Are there any reliefs from the 15% flat rate of SDLT?

There are a number of reliefs that disapply the 15% flat rate. Where a relief is available, it must be claimed in the SDLT return. In such a situation the normal SDLT rules apply (which may, depending on the circumstances, result in the additional 3% residential rate applying nevertheless).

The acquisition of a dwelling is removed from the ambit of the 15% flat rate regime where it is acquired exclusively for any of the following purposes:

  • a property rental business where the property is let to unconnected third parties
  • development or redevelopment as part of a property development trade
  • a property trading business
  • for use in a commercially run trade
  • as the business premises of a property rental business
  • for use as a farmhouse by a qualifying farm worker as part of a farming trade
  • for use by an employee for the purposes of a qualifying business
  • for occupation by a caretaker
  • if it is open to the public for at least 28 days per annum.

A number of conditions need to be satisfied for each relief and these should be considered carefully. The conditions will need to be satisfied for the three years following the date of acquisition and, if they are not, the SDLT originally saved will become payable under a clawback mechanism.

Are there any practical points to consider?

SDLT returns are due within 14 days of the effective date of the transaction which, in most cases, will be the date of completion. Any relief claimed must be claimed in the relevant SDLT return.

SDLT should be considered at an early stage so that the tax position can be explored and alternative methods of holding the property considered.

For further information regarding Stamp Duty Land Tax, please contact Karl Pocock on +44 (0)1603 756544 or [email protected] or Ben Clarke on +44 (0)1603 756466 or [email protected].

The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at April 2021.


Karl Pocock

Partner - Head of Corporate Tax

+44 (0)1603 756544

+44 (0)7772 069178


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