Stamp Duty Rates - Buying a bungalow with an Annexe

Lolzorium

Hello,

I’m hoping for some advice in case anyone has been through something similar.

We’re in the process of buying a bungalow that includes an annexe. Our solicitor has advised that we’ll need specialist guidance to determine the correct level of stamp duty, specifically because of the annexe.

From what I’ve researched, this seems to relate to the Higher Rates for Additional Dwellings (SDLTM09755) rules, which can add an extra 3% to the stamp duty bill. The key issue appears to be whether the annexe is valued at more than one-third of the overall property value.

As far as we’re aware, the annexe hasn’t been separately valued before. It makes up roughly 25% of the total floorspace and, although attached to the main property, it has its own entrance, bathroom, and kitchen, making it self-contained.

Does anyone know how best to proceed in this situation? How would HMRC determine the correct stamp duty liability in practice?

Thanks in advance!

kimwp

Not stamp duty, but a heads up that you might have to pay council tax separately on the annexe.

SDLT_Geek

Lolzorium said:

Hello,

I’m hoping for some advice in case anyone has been through something similar.

We’re in the process of buying a bungalow that includes an annexe. Our solicitor has advised that we’ll need specialist guidance to determine the correct level of stamp duty, specifically because of the annexe.

From what I’ve researched, this seems to relate to the Higher Rates for Additional Dwellings (SDLTM09755) rules, which can add an extra 3% to the stamp duty bill. The key issue appears to be whether the annexe is valued at more than one-third of the overall property value.

As far as we’re aware, the annexe hasn’t been separately valued before. It makes up roughly 25% of the total floorspace and, although attached to the main property, it has its own entrance, bathroom, and kitchen, making it self-contained.

Does anyone know how best to proceed in this situation? How would HMRC determine the correct stamp duty liability in practice?

Thanks in advance!

SDLT is a self-assessed tax, so it is up to you to apply the rules in the first instance.  If the annexe counts as a dwelling in its own right, then as you say you would want that to be a "subsidiary" dwelling.  Those rules are explained here: https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09766  The surcharge you refer to is now a 5% surcharge, rather than a 3% surcharge.

It would be more complicated if, on the day you complete the purchase, you have any other property interests (so that you are relying on the replacement rules, which have a complex interaction with the subsidiary dwelling rules.)

If HMRC enquire into the SDLT treatment they would ask you for evidence that the main dwelling is worth 2/3 or more of the total value.

Lolzorium

SDLT_Geek said:

Lolzorium said:

Hello,

I’m hoping for some advice in case anyone has been through something similar.

We’re in the process of buying a bungalow that includes an annexe. Our solicitor has advised that we’ll need specialist guidance to determine the correct level of stamp duty, specifically because of the annexe.

From what I’ve researched, this seems to relate to the Higher Rates for Additional Dwellings (SDLTM09755) rules, which can add an extra 3% to the stamp duty bill. The key issue appears to be whether the annexe is valued at more than one-third of the overall property value.

As far as we’re aware, the annexe hasn’t been separately valued before. It makes up roughly 25% of the total floorspace and, although attached to the main property, it has its own entrance, bathroom, and kitchen, making it self-contained.

Does anyone know how best to proceed in this situation? How would HMRC determine the correct stamp duty liability in practice?

Thanks in advance!

SDLT is a self-assessed tax, so it is up to you to apply the rules in the first instance.  If the annexe counts as a dwelling in its own right, then as you say you would want that to be a "subsidiary" dwelling.  Those rules are explained here:  The surcharge you refer to is now a 5% surcharge, rather than a 3% surcharge.

It would be more complicated if, on the day you complete the purchase, you have any other property interests (so that you are relying on the replacement rules, which have a complex interaction with the subsidiary dwelling rules.)

If HMRC enquire into the SDLT treatment they would ask you for evidence that the main dwelling is worth 2/3 or more of the total value.

Thanks for the response. No other property interests, we're simply selling our main property and moving. 

How would we go about gathering evidence for the 2/3rd rule. Presume we need independent valuations - but how many would suffice as enough evidence?

Thanks!

SDLT_Geek

Lolzorium said:

SDLT_Geek said:

Lolzorium said:

Hello,

I’m hoping for some advice in case anyone has been through something similar.

We’re in the process of buying a bungalow that includes an annexe. Our solicitor has advised that we’ll need specialist guidance to determine the correct level of stamp duty, specifically because of the annexe.

From what I’ve researched, this seems to relate to the Higher Rates for Additional Dwellings (SDLTM09755) rules, which can add an extra 3% to the stamp duty bill. The key issue appears to be whether the annexe is valued at more than one-third of the overall property value.

As far as we’re aware, the annexe hasn’t been separately valued before. It makes up roughly 25% of the total floorspace and, although attached to the main property, it has its own entrance, bathroom, and kitchen, making it self-contained.

Does anyone know how best to proceed in this situation? How would HMRC determine the correct stamp duty liability in practice?

Thanks in advance!

SDLT is a self-assessed tax, so it is up to you to apply the rules in the first instance.  If the annexe counts as a dwelling in its own right, then as you say you would want that to be a "subsidiary" dwelling.  Those rules are explained here:  The surcharge you refer to is now a 5% surcharge, rather than a 3% surcharge.

It would be more complicated if, on the day you complete the purchase, you have any other property interests (so that you are relying on the replacement rules, which have a complex interaction with the subsidiary dwelling rules.)

If HMRC enquire into the SDLT treatment they would ask you for evidence that the main dwelling is worth 2/3 or more of the total value.

Thanks for the response. No other property interests, we're simply selling our main property and moving. 

How would we go about gathering evidence for the 2/3rd rule. Presume we need independent valuations - but how many would suffice as enough evidence?

Thanks!

The quality of the evidence advisable depends partly on how close to the 2/3 limit you are.  One valuation might well be enough.