The Chancellor’s amendments to the SDLT regime in the budget were ostensibly targeted at tax avoidance schemes where UK residential property is acquired by companies. The law of unintended consequences, however, has applied.
In certain circumstances the new regime will affect farmers and landowners.
Where an individual buys a dwelling for £2m or more the rate of SDLT will be 7% but on a mixed purchase of a dwelling and non-residential property such as a farmhouse and farmland the rate of SDLT on the whole purchase is only 4%. Even if the residential component is more than £2m there is no apportionment. This begs the question of where a purchase of a house with land becomes a mixed purchase and highlights the importance of thoughtful lotting on farm sales to suppress SDLT and attract buyers.
Purchases of dwellings by companies for more than £2m will be subject to penal SDLT rate of 15%. For companies, buying dwellings with non-residential property will not work as a way of avoiding the 15% rate. For corporate purchases the residential element is apportioned and the 15% rate will apply if that value is over £2m.
If a farming partnership includes a company and the partnership buys a farm with a house worth more than £2m this would raise the spectre of the 15% rate.
In addition, the Government will consult on the introduction of annual charge on dwellings worth over £2m that are held in companies. Will this catch farmhouses valued at in excess of £2m that have been held in farming companies prior to March 2012?