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Stamp Duty windfall for mixed-use buildings

Those buying mixed-use buildings and those that have bought such buildings in the last four years may be due a tax windfall, says Sean Randall.

A mixed-use building is generally a building composed of a retail unit on the ground floor and flats above it. They have two alternative tax benefits. Stamp Duty is usually payable at the (up to 10% lower) non-residential tax rates on the price. Or it is possible to claim a Stamp Duty relief on the proportion of the price attributable to the flats.

In early November 2020, HM Revenue & Customs (HMRC) updated their internal guidance manual (which is available online) to confirm that when claiming the relief on purchases of mixed-use buildings, the tax should be calculated without using the 3% surcharge, even for purchases made by companies. This means that the effective tax rate might be lower than 3% and those that claimed the relief within the last four years (having paid tax including the 3% surcharge) are due a refund.

HMRC’s position is the correct interpretation of the rules, but until early November 2020, we were unsure whether HMRC would adopt a different interpretation. We now know that they will not. This should be good news to buyers of mixed-use buildings, irrespective of the scale of the residential element. A significant tax saving may be due, e.g., on a single mixed-use building containing four flats, as well as on a purpose-built private-rented sector development containing 2,000 flats.

Would you like to know more?

If you would like to discuss the above or how it may affect you, please get in touch with your usual Blick Rothenberg contact or Sean Randall, using the details to the right.

For any press queries, please contact David Barzilay whose details are to the right.