HMRC change of policy on SDLT on certain acquisitions of mixed-use property

HMRC has clarified its position that the higher rates of Stamp Duty Land Tax (often referred to as the 3% surcharge) do not apply to the residential element of an acquisition of mixed-use property where a claim to multiple dwellings relief is also made.

The way the complex rules on Stamp Duty Land Tax (SDLT) all layer up on transactions can be difficult to navigate and even HMRC can have trouble with them sometimes. The way the 3% surcharge works when multiple dwellings are acquired in the same transaction(s) as non-residential property is particularly tricky.

In previous years, HMRC has been clear in its published guidance that when buying mixed-use property and claiming Multiple Dwellings Relief (MDR) in a single transaction (or, it can be inferred, a series of linked transactions) the 3% surcharge applies when calculating the SDLT on the residential element of the transaction.

On 13 November, HMRC changed its guidance to say that the 3% surcharge does not apply to those transactions unless “the non-residential element of the transaction is negligible or artificially contrived”. There is no further guidance given to what ‘negligible’ means, nor what might amount to being ‘artificially contrived’, so there may be scope for arguing the point in cases thought to be marginal.

The result of this change of policy is important for anyone who has undertaken a transaction which involves the acquisition of mixed-use property and made a claim to MDR for the same transaction. Such purchasers may be entitled to a refund of the 3% surcharge on the residential element. Anyone seeking a refund will have to work quickly because HMRC is only likely to entertain requests for refunds if they are made no more than 12 months after the filing date for the SDLT return.