Stamp Duty reduced to non residential if demolish a building and then sell on

[marsh3377]

Hi all,

I was just wondering if anyone had any knowledge and/or answers on the following question.

 

I have an interest in a plot of land that currently has a bungalow on it and planning permission to demolish the bungalow and then build 2 new houses. I understand that if I was to buy the plot I would have to pay full Stamp Duty. But, after I'd purchased the plot if I was to knock the building down and then sell on one or both plots, would those buyers be entitled to pay reduced stamp duty as there would be no habitable dwelling? 

 

Thanks!

[Dave Jones]

correct. owner demolishes then you  buy.

[marsh3377]

Thanks Dave.

 

Would I need to do anything to prove this prior to the sale?

[Temp]

Might be worth checking out any implication for the CIL.

 

For example a self builder can only claim the exemption before work starts on site. I'm not sure if demolition is considered starting. It's possible that demolition might save them stamp duty but hit them with the CIL.

 

There should be a common sense solution but the CIL rules don't cover a lot of common situations.

 

[Dave Jones]

11 hours ago, marsh3377 said:

Thanks Dave.

 

Would I need to do anything to prove this prior to the sale?

 

a mate of mine had his solicitor paperwork the process when he did it (company purchase). You decide on how much stamp to pay BUT you will have to justify it should HMRC come a knockin.

[Dave Jones]

9 hours ago, Temp said:

Might be worth checking out any implication for the CIL.

 

For example a self builder can only claim the exemption before work starts on site. I'm not sure if demolition is considered starting. It's possible that demolition might save them stamp duty but hit them with the CIL.

 

There should be a common sense solution but the CIL rules don't cover a lot of common situations.

 

 

I think you could defend CIL as no Building regs had been applied for at the point of demo so no commencement of construction ?

[Omnibuswoman]

Just to be clear that there are two different levies being discussed here: SDLT and CIL. Very different rules apply. 
 

HMRC’s definition of a residential plot (which would potentially attract a higher rate of tax) is not whether or not it has a building on it at the point of sale. It is whether the land itself is ‘residential’. So, for instance, if I took part of my garden and sold it off as a building plot, it would most likely be seen by HMRC as residential. 
 

A plot that has previously had a house on it may well be seen by HMRC as ‘residential’ for SDLT purposes, even if the house has been knocked down. 
 

In my case, the plot we bought had been a field designated as ‘agricultural’ (prior to planning permission being obtained). Our build converted the land to residential, but at the point that we bought it, and SDLT became due, it was not yet ‘residential’. 
 

You would be well advised to seek professional advice, or to ask HMRC for advice on the question about whether or not your particular plot might attract the residential or the non-residential rate of SDLT. 
 

As for CIL, which is essentially an infrastructure development fee, I’m not sufficiently genned up on that to say anything specific. What I do know from reading the forum is that it would be sensible to ask the Council in writing for their opinion, as you may want to rely on that later on. 
 

[Dave Jones]

10 hours ago, Omnibuswoman said:

Just to be clear that there are two different levies being discussed here: SDLT and CIL. Very different rules apply. 
 

HMRC’s definition of a residential plot (which would potentially attract a higher rate of tax) is not whether or not it has a building on it at the point of sale. It is whether the land itself is ‘residential’. So, for instance, if I took part of my garden and sold it off as a building plot, it would most likely be seen by HMRC as residential. 
 

A plot that has previously had a house on it may well be seen by HMRC as ‘residential’ for SDLT purposes, even if the house has been knocked down. 
 

In my case, the plot we bought had been a field designated as ‘agricultural’ (prior to planning permission being obtained). Our build converted the land to residential, but at the point that we bought it, and SDLT became due, it was not yet ‘residential’. 
 

You would be well advised to seek professional advice, or to ask HMRC for advice on the question about whether or not your particular plot might attract the residential or the non-residential rate of SDLT. 
 

As for CIL, which is essentially an infrastructure development fee, I’m not sufficiently genned up on that to say anything specific. What I do know from reading the forum is that it would be sensible to ask the Council in writing for their opinion, as you may want to rely on that later on. 
 

 

the value of a plot is very different to the value of a house for STLD purposes which makes the exercise very tempting.

[Johnnyt]

I’ve had ian interesting conversation with my LPA re CIL.

I got self build exemption and need to submit form 7 part 2 with necessary evidence within 6 months of completion.

However we have not completed and only just after 2 years habitation got the air test done.

We do not intend to move or raise money on the house and was advised if no completion cert than no CIL applies.

However, I was made aware, the 3 year clawback date does not commence until the completion certificate has been issued. The 3 years are taken from the date on the completion certificate.  
So on our demise, someone has to cop for the CIL as a change of ownership within the 3 years.

 

[marsh3377]

Thanks for all the replies. As with all things HMRC related it seems nothing is straight forward or clear!!