Carter Jonas
Carter Jonas

Careful lotting before sale may be needed following SDLT changes

The big surprise in George Osborn’s Autumn Statement in early December was the wholesale revision of the way Stamp Duty Land Tax (SDLT) is levied in England and Wales. There had been many calls for the “slab tax” to be revised and he achieved that in one fell swoop.

It offers the potential for major savings on many residential transactions below £937,500 but above that figure there’s every chance of a more punitive Stamp Duty bill to be paid by purchasers. So what will the effect be on the Farms and Estate market?

The existing 4% SDLT rate has remained unchanged for “non-residential and mixed use properties” and it means that careful attention must be given when offering for sale large landholdings that include residential properties.

Farmers Weekly’s Land Tracker shows the area of open market sales has fallen about 15%, suggesting only about 110,000 acres were publicly marketed in 2014.

At a price of £1 million, the difference in SDLT using the new residential system and 4% mixed use rate is only £3,750, perhaps not enough to concern a buyer. But where these homes are of substantial size and likely to attract prices in excess of £2 million the

amount of SDLT puts a different complexion on the transaction and many potential buyers will prefer to see their money spend on tangible assets rather than a contribution to HMRC.

This incentive is clearly illustrated by the difference in tax – at £153,750 the sliding scale residential SDLT bill is almost double the £80,000 at the fixed 4% for a £2 million residential property which qualifies as a “mixed use property”. When the residential element is worth say £5 million the savings are even more eye-watering with the sliding scale SDLT difference rising to £240,000.

The exponential SDLT penalty if you lose the protection of the “mixed use property” means that overlotting an Estate or farm may remove the protective cloak which is a further benefit when dealing in the sale of rural property. It is therefore imperative that vendors put themselves in the shoes of potential purchasers when deciding their sales strategy. As always, careful discussion with those involved in the transaction before sales particulars are prepared, and a need to be flexible over divisions during negotiations of a sale, are likely to be imperative.

Take a look at our Stamp Duty Calculator.

Richard Liddiard

Richard Liddiard

Partner

Richard is based in Newbury where he advises clients throughout the region on rural matters but specialising in farm agency/buying and family farming structures where he is a trusted external advi...

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