Shop with flat above and SDLT

brodawel

Hello

We sold our house a few months ago and we are now renting while looking for somewhere else to buy. We don't currently own any properties. A shop with a flat above has come up for sale. We would like the shop for ourselves but we wouldn't use the flat ourselves other than perhaps temporarily while house hunting.

My question is, if we bought this shop before buying our next house, how will the stamp duty work for us when we find a house to buy? We could start using the shop and we could either carry on renting our current place or we could move into this flat short term. Hopefully we will find a nice house to buy in the same area in the next few months. Would we have to pay the extra 3% on the house we eventually buy?, the house will be quite a lot more expensive than this shop. We are not particularly looking to become landlords and I wish it was just a shop without a flat, but I would want to keep both just so I have control over whats happening above our shop. It's very modern almost new build with separate access to the flat above which has been let until recently for £100 per week.

Thanks

anselld

It would be best to buy the house first, then the mixed use.

dc197

Mixed use aside, I think you have a certain period, maybe 18 months, in which to claim back second home stamp duty incurred due to temporarily owning two homes. Google it.

davidmcn

brodawel wrote: »

It's very modern almost new build with separate access to the flat above which has been let until recently for £100 per week.

So are they actually separate properties (as far as planning, council tax etc are concerned), just being marketed together? Or is there an internal connection between the flat and shop?

kinger101

Mixed use properties (including shops with flats) are treated as non-residential, so it is my understanding that mixed used property will not trigger higher SDLT. In fact, the SDLT rates used for commercial properties are different to the residential ones.

You might need to check whether this would be classed as one or two properties though.

anselld

kinger101 wrote: »

Mixed use properties (including shops with flats) are treated as non-residential, so it is my understanding that mixed used property will not trigger higher SDLT. In fact, the SDLT rates used for commercial properties are different to the residential ones.

Mixed use does not incur extra SDLT when you buy it. However if you already own a mixed use it triggers extra SDLT if you buy another residential.

brodawel

Thanks for the replies.

They are separate in that you can't get into the flat from the shop. They both have a front door to the street. The flat has a small entrance hall 1.7mx1.7m then stairs to the flat above the shop. I don't yet know how they are classed as far as council tax, planning etc but the shop was used to produce and sell cakes. The shop has been empty for a year but the flat has been let out until recently.

I did wonder if mixed use would make a difference but I can't seem to find info to confirm if we would be classed as second home. We would technically own a flat above a shop as well as the next home we buy. We more than likely would not ever live in the flat because we are happy in our little rented place while house hunting, but could this make a difference if we did or did not use the flat as a home for a short time.

Thanks again

kinger101

anselld wrote: »

Mixed use does not incur extra SDLT when you buy it. However if you already own a mixed use it triggers extra SDLT if you buy another residential.

Strange anomaly, but I think you're right; as the legislation refers to dwellings, which though not defined is the legislation, does seem to include parts of buildings from other stuff I've read.

brodawel

kinger101 wrote: »

Strange anomaly, but I think you're right; as the legislation refers to dwellings, which though not defined is the legislation, does seem to include parts of buildings from other stuff I've read.

Oh dear!

That's put a rather different light on the whole idea. The shop is approx 120K and our next home will be approx 350K. If we buy the shop first we'll then have to pay approx 18K instead of 7.5K when we buy a house. If we buy a house first we would pay approx 3.6K instead of zero when we buy the shop.

Not quite as appealing now.

kinger101

brodawel wrote: »

Oh dear!

That's put a rather different light on the whole idea. The shop is approx 120K and our next home will be approx 350K. If we buy the shop first we'll then have to pay approx 18K instead of 7.5K when we buy a house. If we buy a house first we would pay approx 3.6K instead of zero when we buy the shop.

Not quite as appealing now.

Do you know what the value of the flat associated with the shop might be? If it's below £40K, it wouldn't count for the purposes of the new SDLT.

kinger101

dc197 wrote: »

Mixed use aside, I think you have a certain period, maybe 18 months, in which to claim back second home stamp duty incurred due to temporarily owning two homes. Google it.

It's actually 36 months, but I'm afraid this wouldn't work in this instance even if OP moved into the flat. The flat would have needed to have been their residence at some point in the three years prior to the sale to reclaim the SDLT.

The meaning of residence has been tested in CGT case law, and it means more than just living in the property. There is a qualitative aspect, where the owner must have some expectation that their stay will have a degree of continuation. If they only intend to move in short term, it will not be their residence.