VAT Director Rayner Essex
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SDLT: Attempt to escape corporate surcharge


A shareholder agreement that restricted use of a holiday property to five days per year broke the stamp duty land tax (SDLT) rule that excludes all connected parties from using the property.

11th Jun 2021
VAT Director Rayner Essex
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Waterside Escapes Ltd (TC07881) acquired a property for rent and calculated the stamp duty land tax (SDLT) on basis the 15% corporate rate was not applicable. This was due to the intended rental use, and that it was not to be used or occupied by the company or its officers. 

There are two aspects to this case:

  • whether the 15% SDLT surcharge is applicable due to personal use of the property
  • if the surcharge is applicable, what value is used to calculate the SDLT. 

In this article I am focusing on the surcharge aspect as it highlights the need to be careful when drafting legal documents.

SDLT exemption

When a corporate entity purchases a dwelling in England or Northern Ireland valued at over £500,000, a 15% SDLT surcharge applies to the whole value. This surcharge is designed to deter dwellings being held within a corporate wrapper.

There are a number of exemptions from this surcharge, including where the dwelling is held for rental income purposes, such as buy to lets and holiday homes. The exemption is withdrawn (and the surcharge applies) if the property is occupied by the owner or connected persons within three years of acquisition.

Facts of the case

Waterside Escapes Ltd let holiday properties. The company was 50% owned by Mrs Hume-Kendall and the remaining 50% held by an unconnected trust. Within the shareholder agreement, there was provision for the shareholders to occupy the property for no more than five days per year, “provided that the property would otherwise be vacant”. 

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