15% High SDLT Rate for Corporate-Owned Resi Properties

(SDLT Rates and Calculations)

Section Summary: This section outlines the 15% high SDLT rate applied to residential properties purchased by companies, partnerships with company members, and collective investment schemes, especially focusing on high-value homes.

Key Points:

  • The 15% SDLT rate applies to properties over £500,000 bought by certain entities.
  • From April 2021, a 17% rate applies to non-UK residents due to an additional 2% surcharge.
  • Anti-avoidance rules prevent reducing this rate through reliefs or purchase splitting.

Main Principles: The high SDLT rate aims to discourage “enveloping,” where companies buy high-value homes to avoid future SDLT, ensuring fair tax contributions from these transactions.

When companies or certain types of partnerships and investment schemes buy residential properties, they often face a higher Stamp Duty Land Tax (SDLT) rate. This section explains how these rules apply, especially to high-value homes, and the impact on property investors. 

Understanding the 15% SDLT Rate

Who It Affects: This higher rate targets companies, partnerships with company members, and collective investment schemes purchasing single dwellings.

Thresholds and Rates:

  • Originally, a 15% SDLT rate was applied to residential properties purchased for more than £2 million starting from 21 March 2012.
  • From 20 March 2014, the threshold was lowered to £500,000.
  • For purchases from 1 April 2021, the rate increases to 17% if the buyer is a non-UK resident due to an additional 2% surcharge.

Special Considerations:

  • This rate doesn’t change based on the number of properties bought in a single transaction.
  • Attempts to reduce this rate through certain reliefs or by splitting the purchase into smaller parts are blocked by anti-avoidance rules.

Example 1: A company, Luxe Homes Ltd., buys a residential property for £600,000 on 22 March 2014. They would face a 15% SDLT rate due to the value exceeding the £500,000 threshold.

Example 2: In another scenario, if Global Investors Inc., a non-UK-based company, purchases a residential property for £700,000 on 2 April 2021, they would be subject to a 17% SDLT rate because of the non-UK resident surcharge.

The Purpose Behind the High Rate

The government introduced this higher SDLT rate primarily to discourage the practice of “enveloping.” Enveloping involves buying high-value homes through companies to avoid SDLT on future transfers of the property. This rule aims to ensure that these transactions contribute their fair share of tax.

Impact on Previously Owned Properties

Properties already owned by companies before these rules were introduced weren’t directly affected by the change in SDLT rates. However, the Annual Tax on Enveloped Dwellings (ATED) was introduced on 1 April 2013, applying an annual charge to high-value residential properties owned by companies, both retrospectively and going forward. This move further discourages enveloping by imposing ongoing costs on corporate-owned residential properties.

Eligibility for Relief from the 15% Higher Rate Charge:

Stamp Duty Land Tax (SDLT) relief on the 15% higher rate charge is designed to exempt certain types of property transactions from the elevated rate usually applied to corporate bodies and certain non-natural persons acquiring residential properties. Below are illustrative examples:

  1. Relief for Property Rental Businesses
  • Relief Description: This relief is available to companies purchasing residential properties with the intent of using them in a bona fide rental business.
  • Conditions: The property must be intended for rental to tenants and used as such within a reasonable period following the purchase. The rental activity must be conducted by a genuine business and not merely as a nominal activity to avoid SDLT.
  • Example: A property investment company purchases several apartments with the intention of renting them out to long-term tenants. If these properties are rented out continuously and managed as part of the company’s rental business portfolio, the company could qualify for relief from the 15% higher SDLT rate.
  1. Relief for Property Developers or Traders
  • Relief Description: Available to entities whose business is developing or trading in properties.
  • Conditions: The purchased property must be intended for refurbishment and resale or developed for sale as part of the ordinary course of business. The entity must regularly engage in such activities.
  • Example: A property development firm purchases a residential building to renovate and sell the individual units. As property development is the firm’s routine business, and the intent is to sell the units post-renovation, this transaction could qualify for the SDLT relief.
  1. Relief for Properties Made Available to the Public
  • Relief Description: This relief applies to properties bought to be made available for public use.
  • Conditions: The property should be open to the public or provide a public service, such as a museum, gallery, or possibly a bed and breakfast.
  • Example: A company purchases a historic house and converts it into a museum that is open to the public. This usage would qualify for SDLT relief under this category.
  1. Relief for Financial Institutions in the Course of Lending
  • Relief Description: Applicable to financial institutions acquiring properties through lending activities.
  • Conditions: The property acquisition must be directly related to lending activities, such as through taking possession of a foreclosed property.
  • Example: A bank forecloses on a residential property due to loan defaults and acquires it as part of its lending business. This acquisition could be exempt from the higher SDLT rate.
  1. Relief for Properties Occupied by Employees
  • Relief Description: Available for properties purchased to house employees.
  • Conditions: The primary reason for the purchase must be to provide residences for employees who are essential to the business’s operations.
  • Example: A farm buys a nearby house to provide living accommodations for farmhands who must be on-site daily. This property would qualify for SDLT relief under this criterion.
  1. Relief for Farmhouses
  • Relief Description: Specifically designed for farmhouses that are integral parts of a farming business.
  • Conditions: The farmhouse must be occupied by someone engaged in farming the associated land, and the farming activity must be substantive and genuine.
  • Example: A working farm acquires an adjoining piece of land with a farmhouse. If the farm manager moves into the farmhouse to more effectively manage the farm operations, this transaction may qualify for relief.
  1. Relief for Qualifying Housing Co-operatives
  • Relief Description: Available to housing co-operatives purchasing properties for their members.
  • Conditions: The co-operative must be structured and recognised as a housing co-operative, and the property must be used to provide housing to its members.
  • Example: A housing co-operative purchases an apartment building to provide affordable housing options to its members. As long as the co-operative meets the regulatory standards, this purchase could benefit from SDLT relief. 

Focus: What Is a Qualifying Property Rental Business?

A “qualifying property rental business” is essentially a business that rents out property. For it to qualify for specific SDLT reliefs, it must operate on a commercial basis and aim to make a profit. This means the business should be professionally managed, maintain accurate financial records, and have a clear intention to generate more income than expenses.

What Are Excluded Rents?

“Excluded rents” refer to income from certain types of property uses that don’t count as part of a qualifying rental business for specific tax reliefs. These include:

  • Rents for allowing electric lines (an electric-line wayleave) to cross your land.
  • Payments for placing pipelines for gas or oil on your property.
  • Fees for the siting of mobile phone masts or similar structures for electronic communication.
  • Payments for installing wind turbines on your land.

These types of income are treated differently for SDLT purposes, mainly because they involve leasing land for specific utilities rather than typical residential or commercial occupancy.

Reliefs and Conditions

SDLT reliefs for property rental businesses are designed to prevent misuse and ensure only eligible businesses benefit. These reliefs are similar to those available for the Annual Tax on Enveloped Dwellings (ATED) but with distinct conditions for eligibility.

Understanding SDLT Mixed-Use Relief and Misconceptions About Avoiding the 15% Rate

Investors might think they can bypass the 15% SDLT rate by classifying their property purchases as mixed-use, such as buying a house with adjoining farmland, hoping to apply non-residential stamp duty rates to the entire transaction. However, this strategy is ineffective unless the transaction qualifies for specific SDLT reliefs.

Explanation of Mixed-Use SDLT Relief

What is Mixed-Use Relief? Mixed-Use Relief applies when a transaction involves both residential and non-residential properties. Typically, the entire transaction is then taxed at non-residential rates, which can be lower than residential rates.

Conditions for Relief  The property must include a mix of residential and non-residential elements. Simply purchasing residential and non-residential properties together does not automatically qualify the transaction as mixed-use unless they form a coherent whole.

Example of Mixed-Use Transaction An investor purchases a building with ground-floor retail spaces (non-residential) and apartments above (residential). This would typically be assessed under mixed-use rules, potentially lowering the SDLT liability compared to treating the apartments as separate residential properties.

Clarification on the 15% Higher Rate and Its Application

Specificity of the 15% Higher Rate The 15% higher rate of SDLT applies specifically to residential properties acquired by certain non-natural persons (like companies) when the property value exceeds the threshold set by HMRC.

Conditions and Separation of Interests Under HMRC regulations, if a transaction is mixed-use but includes a residential property that alone exceeds the higher rate threshold, this residential property must be treated as a separate transaction for SDLT purposes. Thus, even in a mixed-use context, high-value residential components could still attract the 15% rate.

Example Illustrating the Application

  • Estate Purchase: A company purchases an estate comprising a mansion valued at £2.5 million and adjoining farmland worth £2.5 million, totaling £5 million. The SDLT for the mansion would be subject to the 15% rate due to its valuation, whereas the farmland would be taxed at non-residential rates if not subject to available reliefs.
  • Multiple Dwellings: A company buys six properties in one transaction, where one property is valued at £1 million (a higher threshold interest), and the other five are valued under £500,000 each. The £1 million property would attract the 15% rate and be treated separately, while the others would be taxed at non-residential rates if the conditions are met, assuming there are no other reliefs.

Important Considerations

Compliance and Documentation When structuring a transaction as mixed-use, it’s crucial to ensure that the arrangement genuinely meets the criteria set by HMRC. Proper documentation must be maintained to justify the classification.

Risk of Enquiry HMRC operates on a ‘pay now, check later’ basis, meaning they may initially process claims based on procedural correctness but can later initiate inquiries within nine months. These inquiries seek to verify the validity of the SDLT treatment applied, especially in complex mixed-use or high-value transactions.


Investors must understand that while mixed-use transactions offer potential SDLT benefits, they do not automatically exempt high-value residential components from the 15% rate if these components individually meet the criteria for the higher rate. Proper understanding and compliance with SDLT rules are crucial to avoid unexpected tax liabilities.


Case Studies and Tribunal Decisions

Two tribunal cases illustrate the complexities around these reliefs:

  • Consultus Care & Nursing Ltd v HMRC: This case emphasised that for a property purchase to qualify for relief, it must be bought solely for exploitation as a source of rent (other than excluded rents) within a qualifying rental business. The tribunal found that the property in question had multiple purposes behind its purchase, disqualifying it from relief.
  • Waterside Escapes Ltd v HMRC: Here, a clause in a shareholder agreement allowed shareholders free use of a property for up to five nights per year. This clause disqualified the property from relief because it was not acquired exclusively for rental business purposes. The law specifically states that if a property is intended for use by individuals who don’t qualify (like shareholders in this context), it cannot be considered purchased exclusively for a qualifying rental business.

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This Article Written By Nick Garner
Founder Stamp Duty Advice Bureau
Author of Stamp Duty Land Tax Guide
For Property Investors.