SDLT query - mixed use building

SDLT query - mixed use building

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My client's company owns a building which is shop on the ground floor and a flat on the first and second floors. He is living in the flat.

He is going to transfer the building out of the company into his name (and intends to lease the commercial premises back to the company).

If he transfers the whole building for £295,000 how much SDLT is due given its mixed use?

If he transfers the flat only on a leashold basis for £115,000 and later the business premises/land for £180,000 how much SDLT is due? Is this regarded as one transaction for SDLT purposes?

thanks for your assistance.

S Hall

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By Paul Soper
19th Mar 2007 21:56

Mixed use
The only area where mixed use makes a difference is the thresh-hold - for a building which is not wholly residential SDLT starts at £150,000 rather than £125,000.

Transferring the leasehold and then the freehold would certainly be treated as a linked transaction and the rate of tax payable found by the aggregate liability.

The rate, at £295,000, is 3% on the whole value. But it is the value of the transaction that is relevant here NOT the market value of the building. Market value would apply if your client was transferring the land TO the company but not on accepting a transfer from the company. There is no general connected person rule for SDLT purposes. If you placed a value of £250,000 exactly the liability would be only 1%. If the company gave the asset to your client there would be no liability at all. BUT...

Transferring the asset at less than MV would create a benefit in kind, with liabilities top tax and NIC far exceeding the SDLT saving and in addition...

From a CGT point of view (has your client given any thought to this as you don't mention it) the gain must be calculated at MV reagrdless of the agreed value of the transaction.

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