Rural property buyers are being advised to seek expert opinion when considering a purchase to avoid unexpected Stamp Duty Land Tax (SDLT) costs.
Stephanie Christensen, a valuations expert based in our Exeter office, warns that following recent legal challenges, buyers are at risk of being liable to pay a higher 'Residential' rate of SDLT than the significantly lower 'Mixed Use' rate that might be assumed to be payable for property with land.
Whilst larger farms usually qualify for the lower rate, smaller holdings may be taxed at a higher residential rate if the land is not used for bona fide commercial purposes. The difference in tax payable can be substantial and not only affect affordability by the purchaser, but consequently also depress the sale price achieved.
Stephanie said: “HMRC are increasingly scrutinising claims, and being successful in their challenges, forcing buyers to pay the higher rate of tax. For example, in the recent case of Pensfold v HMRC [2020] the Tribunal found in favour of HMRC in rejecting a claim for a 27-acre holding where the land had previously been let to a third party and the buyer intended to set up a commercial agri-tourism venture.
Importantly, the descriptions in the sales particulars were cited as evidence for the decision. We are aware of other similar cases, including some concerning larger acreages, highlighting the importance of buyers and sellers engaging specialists at an early stage to advise over potential SDLT tax liability.”
Find out online Stamp Duty calculator here. For more information or advice on property valuation matters, please don’t hesitate to contact Stephanie or any member of our valuations team.
