Save stamp duty tax on ‘mixed purchase’ properties

Buyers who have purchased commercial and residential property in a single or joint transaction, a so-called ‘mixed purchase,’ may be eligible for a refund in stamp duty.

In an unusual move HM Revenue & Customs has changed its rules which means if you paid the duty on previous Stamp Duty Land Tax (SDLT) figures, you may be able to get some money back with an amended return.

However, the time limit for submitting an amended return is 12 months after the SDLT return filing date, which is 14 days after the effective date of completion. 

The default position on a mixed purchase, for example, a parade of shops with flats over, is that the ‘non-residential’ rates apply.  However, if there are at least two dwellings involved, you can choose to pay stamp duty on the non-residential and residential parts at their different rates.

Previously, residential rates were usually subject to the three per cent surcharge, but HMRC has now changed its mind and the surcharge does not apply in these circumstances. 

The result is that making the choice will save tax in many more cases, and in some instances, a tax rate as low as one per cent could now apply to the residential element of the transaction.

There is a caveat: if the non-residential element of the transaction is negligible or artificially contrived then all bets are off, and the three per cent surcharge will still apply.  

So to summarise:

If you are buying a mixture of residential and commercial property in a single transaction or linked transactions, you should ensure that your solicitor considers the changes when completing your SDLT return. 

If you have in the past purchased residential and commercial property in a single transaction or linked transactions, you may be able to file an amended SDLT return and claim a refund of some of the SDLT paid.  But be quick: the time limit for submitting an amended return is 12 months. 

If it is too late to amend an SDLT return, it may still be possible to make a claim up to four years after the effective date of the transaction, though the acceptance of such a claim would be at HMRC’s discretion. It may nonetheless be worth submitting a claim, especially if the sums are large.

For help and advice on matters relating to stamp duty relating to the commercial and residential property sector, contact our expert team today.