Special stamp duty land tax (SDLT) rules apply where there are multiple sales or transfers between the same buyer and seller.
Where two or more property transactions involve the same buyer and seller, they may be ‘linked’ for SDLT purposes. HMRC may treat a person connected to the buyer, such as a spouse or civil partner, a child or a sibling, as the same buyer and persons connected to the seller as the same seller when seeking to apply the linked transaction rules.
Transactions count as ‘linked’ if:
- there is more than one transaction;
- the same transactions are between the same buyer and seller (or people connected to them); and
- the transactions are part of a single arrangement or scheme or part of a series of transaction.
Transactions may be linked because they form part of the same single arrangement or scheme, regardless of whether they are documented separately. So, transactions would be linked if the husband purchases a house and his wife purchases associated land from the same seller. The buyers are connected and purchasing the property and land from the same seller is part of the same deal.
Transactions may also be linked where they form a series. There is no limit to the time between transactions for them to be regarded as linked.
The whole picture
Where transactions are linked, it is necessary to look at the whole picture – the buyer pays SDLT by reference to the total value of all the linked transactions rather than separately on the value of each individual transaction. This may mean that more SDLT is payable than if each transaction is assessed individually – only one threshold is available and the SDLT may be payable at the higher rates.
The approach is to work out the SDLT on the total value of all the linked transaction and apportion it to the individual transactions.
Where all the linked transactions are residential, SDLT is charged using the residential rates, including the 3% additional property supplement where relevant. The residential SDLT threshold is increased to £500,000 from 8 July 2020 to 31 March 2021.
If one or more property is non-residential – the non-residential and mixed property rates of SDLT apply.
Harry buys two houses to let out from the same builder – one for £450,000 and one for £650,000. The builder has given him a discount for purchasing more than one property. The sales complete in July 2020 and August 2020.
SDLT @ 3% is payable on the first property – a total of £13,500 (£450,000 @ 3%).
On the second purchase, the SDLT is worked out on the total consideration of £1.1 million. The SDLT is £71,750 ((£500,000 @ 3%) + (£425,000 @ 8%) + (£175,000 @ 13%)). This equates to £35,875 per property, so Harry must pay £38,875 on completion of the second purchase and a further £22,375 on the earlier purchase.
Had the SDLT been worked out separately on the second property, the bill would have been £27,000 ((£500,000 @ 3%) + (£150,000 @ 8%)) – a total for both properties of £40,500.
Applying the linked property rules increases the bill by £31,250.
Same buyer and seller but no link
The linked rules do not apply to transactions between the same buyer and seller if there was no prior agreement or option, no special price or discount was agreed and there was nothing else to link the transactions. The additional SDLT cost should be weighed up against any discount negotiated.
Partner note: FA 2003, s.108