Purchasing Detached property with GF Flat. Additional Stamp Duty Due?

RedDevil1974

We are looking at purchasing a detached house which has a studio flat on the lower ground floor. The flat has its own address and separate council tax banding. The house was built as it is now in the 1970's and doesn't appeared to be registered with land registry. The flat has been let out in the past but is still connected to the main homes services ie. electric/gas etc. We are getting conflicting opinions on whether we would have to pay the additional stamp duty charge as we are in effect purchasing two properties, which takes the normal charge from 12.5k to 32.5k! we don't need to keep the flat nor do we really need the additional accommodation added to what is in the main home. We are selling our home (our only property) and purchasing this one. Does anyone have any thoughts or has gone through this scenario themselves? What is the best way to do this and hopefully avoid an additional 20k tax!

grumpy_codger

Not an answer to your question, but higher council tax on a second property (up to 200%, council dependent) is also to be concerned about. IIRC some councils want to charge it even on a stationary caravan in a back garden.

SDLT_Geek

RedDevil1974 said:

We are looking at purchasing a detached house which has a studio flat on the lower ground floor. The flat has its own address and separate council tax banding. The house was built as it is now in the 1970's and doesn't appeared to be registered with land registry.

The flat has been let out in the past but is still connected to the main homes services ie. electric/gas etc. We are getting conflicting opinions on whether we would have to pay the additional stamp duty charge as we are in effect purchasing two properties, which takes the normal charge from 12.5k to 32.5k!

we don't need to keep the flat nor do we really need the additional accommodation added to what is in the main home. We are selling our home (our only property) and purchasing this one. Does anyone have any thoughts or has gone through this scenario themselves? What is the best way to do this and hopefully avoid an additional 20k tax!

Assuming you are buying in England, the relevant stamp duty is stamp duty land tax.  You are likely to be saved from the extra 5% SDLT by the "subsidiary dwelling" rule, which is mentioned in HMRC guidance:

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09755 

and

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09766

poseidon1

SDLT_Geek said:

RedDevil1974 said:

We are looking at purchasing a detached house which has a studio flat on the lower ground floor. The flat has its own address and separate council tax banding. The house was built as it is now in the 1970's and doesn't appeared to be registered with land registry.

The flat has been let out in the past but is still connected to the main homes services ie. electric/gas etc. We are getting conflicting opinions on whether we would have to pay the additional stamp duty charge as we are in effect purchasing two properties, which takes the normal charge from 12.5k to 32.5k!

we don't need to keep the flat nor do we really need the additional accommodation added to what is in the main home. We are selling our home (our only property) and purchasing this one. Does anyone have any thoughts or has gone through this scenario themselves? What is the best way to do this and hopefully avoid an additional 20k tax!

Assuming you are buying in England, the relevant stamp duty is stamp duty land tax.  You are likely to be saved from the extra 5% SDLT by the "subsidiary dwelling" rule, which is mentioned in HMRC guidance:

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09755 

and

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09766

This guidance on control of utilities may be the tie breaker favouring 1 single dwelling despite all the other opposing factors favouring 2. 

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00430

A conveyancer favouring a single dwelling ( reduced SDLT) approach would need to be ready to launch a robust defence of their position having regard to the totality of the guidance. This is a case that seems to be on the cusp.

SDLT_Geek

poseidon1 said:

SDLT_Geek said:

RedDevil1974 said:

We are looking at purchasing a detached house which has a studio flat on the lower ground floor. The flat has its own address and separate council tax banding. The house was built as it is now in the 1970's and doesn't appeared to be registered with land registry.

The flat has been let out in the past but is still connected to the main homes services ie. electric/gas etc. We are getting conflicting opinions on whether we would have to pay the additional stamp duty charge as we are in effect purchasing two properties, which takes the normal charge from 12.5k to 32.5k!

we don't need to keep the flat nor do we really need the additional accommodation added to what is in the main home. We are selling our home (our only property) and purchasing this one. Does anyone have any thoughts or has gone through this scenario themselves? What is the best way to do this and hopefully avoid an additional 20k tax!

Assuming you are buying in England, the relevant stamp duty is stamp duty land tax.  You are likely to be saved from the extra 5% SDLT by the "subsidiary dwelling" rule, which is mentioned in HMRC guidance:

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09755 

and

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09766

This guidance on control of utilities may be the tie breaker favouring 1 single dwelling despite all the other opposing factors favouring 2. 

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00430

A conveyancer favouring a single dwelling ( reduced SDLT) approach would need to be ready to launch a robust defence of their position having regard to the totality of the guidance. This is a case that seems to be on the cusp.

The solution might be much simpler though.  If the "subsidiary dwellings rule" would apply if the the building counts as two dwellings for SDLT, then it might not matter whether or not the building counts as two dwellings.

eddddy

RedDevil1974 said:

We are looking at purchasing a detached house which has a studio flat on the lower ground floor. 

It's not what you're asking about - but do you plan to buy with a mortgage?

If so, it could be a bit of challenge getting a mortgage for that property. You might have to get a specialist mortgage from a specialist lender for a property like that - which might be considerably more expensive than the deals offered by the mainstream lenders.

If and when you're happy with the SDLT position, maybe talk to a mortgage broker next - and tell them what you plan to do with the studio flat.

RedDevil1974

eddddy said:

RedDevil1974 said:

We are looking at purchasing a detached house which has a studio flat on the lower ground floor. 

It's not what you're asking about - but do you plan to buy with a mortgage?

If so, it could be a bit of challenge getting a mortgage for that property. You might have to get a specialist mortgage from a specialist lender for a property like that - which might be considerably more expensive than the deals offered by the mainstream lenders.

If and when you're happy with the SDLT position, maybe talk to a mortgage broker next - and tell them what you plan to do with the studio flat.

Hi We currently have a small mortgage on existing of 50k we ideally would port this across but could pay it off if we had to. thanks for your comment though, food for thought!

saajan_12

RedDevil1974 said:

We are looking at purchasing a detached house which has a studio flat on the lower ground floor. The flat has its own address and separate council tax banding. The house was built as it is now in the 1970's and doesn't appeared to be registered with land registry. The flat has been let out in the past but is still connected to the main homes services ie. electric/gas etc. We are getting conflicting opinions on whether we would have to pay the additional stamp duty charge as we are in effect purchasing two properties, which takes the normal charge from 12.5k to 32.5k! we don't need to keep the flat nor do we really need the additional accommodation added to what is in the main home. We are selling our home (our only property) and purchasing this one. Does anyone have any thoughts or has gone through this scenario themselves? What is the best way to do this and hopefully avoid an additional 20k tax!

What would you do with the rooms in the flat - eg let it out long term, short term, keep it as extra space, split titles and sell on?