Higher SDLT - mixed use property

AnonMonkey

Hi guys, 

I currently own 50% share of a lease (11 years remaining) on a mixed use property i.e. the property is used as a shop (run by my mum) on the ground floor and there is a flat above the shop (where I currently live in with my mum).
I am looking to purchase a residential property for myself in the next few months. I am unsure whether I would need to pay the higher SDLT of additional 3% on the residential property I intend to purchase - can someone with more knowledge help me with this? 
On the Govt website, it states that property with a mixed use does not attract a higher SDLT. But I'm unsure whether this only applies to the scenario where someone already owns a residential property and they are looking to buy a mixed use property. 

Any help would be hugely appreciated!

SDLT_Geek

It is correct that buying a mixed use property does not attract SDLT.  But the property you are looking to buy will not be mixed use; it is the property you already have a leasehold interest in which is mixed use.  So the conditions of relevance to you are the ones in "Condition C" set out in Finance Act 2003 / Schedule 4ZA / para3(4).  Here are some notes:
(a)  Condition C can catch a mixed use property, it is about whether you have an "interest in dwelling other than the purchased dwelling".  Assuming the flat is self-contained, then you do have an interest in another dwelling.
(b)  Condition C refers to having a "major interest".  A lease granted for over 7 years is a major interest, so there is no "get out" for you based purely on the lease only having 11 years remaining.
(c)  What is likely to save you from the 3% surcharge is the element of Condition C in para3(4)(b).  This is that the share in the lease of the dwelling has a market value of £40,000 or more.  If the lease of the shop and the flat is at a market rent, then it is unlikely that the value of your share in the lease, so far as it relates to the flat, has a market value of £40,000 or more.

AnonMonkey

Thanks SDLT_Geek! 

The shop and the flat can be accessed by an internal door so I don't know whether that means the flat is not self-contained.

on point c) I was wondering who determines the market value? I actually inherited the 50% share after my step-dad passed away so I wouldn't know what the market value of the lease is. As I understand it, we actually have a valuable lease. We only need to pay a rent of <£20 each year for the remaining 12 years left on the lease (the lease was issued 100 years ago on a fixed rent). 

Anyhow, I'll make a call to HMRC to enquire further. I am also looking to gift away the 50% share, which hopefully will mean I can claim back the higher rate SDLT I'd need to pay on the new residential property as long as the gift happens within 3 years of completion of the new residential property - is that correct?

getmore4less

AnonMonkey said:

Thanks SDLT_Geek! 

The shop and the flat can be accessed by an internal door so I don't know whether that means the flat is not self-contained.

on point c) I was wondering who determines the market value? I actually inherited the 50% share after my step-dad passed away so I wouldn't know what the market value of the lease is. As I understand it, we actually have a valuable lease. We only need to pay a rent of <£20 each year for the remaining 12 years left on the lease (the lease was issued 100 years ago on a fixed rent). 

Anyhow, I'll make a call to HMRC to enquire further. I am also looking to gift away the 50% share, which hopefully will mean I can claim back the higher rate SDLT I'd need to pay on the new residential property as long as the gift happens within 3 years of completion of the new residential property - is that correct?

was that an absolute inheritance or does your mum have the right to live in the property given in the will?

AnonMonkey

getmore4less said:

AnonMonkey said:

Thanks SDLT_Geek! 

The shop and the flat can be accessed by an internal door so I don't know whether that means the flat is not self-contained.

on point c) I was wondering who determines the market value? I actually inherited the 50% share after my step-dad passed away so I wouldn't know what the market value of the lease is. As I understand it, we actually have a valuable lease. We only need to pay a rent of <£20 each year for the remaining 12 years left on the lease (the lease was issued 100 years ago on a fixed rent). 

Anyhow, I'll make a call to HMRC to enquire further. I am also looking to gift away the 50% share, which hopefully will mean I can claim back the higher rate SDLT I'd need to pay on the new residential property as long as the gift happens within 3 years of completion of the new residential property - is that correct?

was that an absolute inheritance or does your mum have the right to live in the property given in the will?

Hi, 

I'm not sure what you mean?
My mum and myself both have a 50% share of the remaining lease. I'm planning to gift my 50% share to her, I have no interest in the property. 

SDLT_Geek

My mum and myself both have a 50% share of the remaining lease. I'm planning to gift my 50% share to her, I have no interest in the property. 

If you complete the gift of the 50% share in the lease before you complete the purchase of your home then the problem is solved simply.

AnonMonkey

SDLT_Geek said:

My mum and myself both have a 50% share of the remaining lease. I'm planning to gift my 50% share to her, I have no interest in the property. 

If you complete the gift of the 50% share in the lease before you complete the purchase of your home then the problem is solved simply.

Thanks, yeah I suppose I was trying to see whether I can negate the legal fees involved in the transfer of equity. I'll likely not be able to complete the transfer fast enough (Landlord is the council and I find is very slow) and therefore will need to save up for the 3% surcharge.