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If you’re thinking of buying a home for yourself and your horses, there are ways of reducing your Stamp Duty Land Tax as you do so. Chartered Surveyor Lydia Cox of Stags Professional Services department considers the options.
When the change in Stamp Duty Land Tax structure came into force in 2014, it became more expensive to buy higher-end properties, a bracket which often includes equestrian properties.
However, there could be ways to mitigate this land liability by understanding the opportunities that may arise from the definition of your new equestrian home. The key question is whether the property is classified as residential or ‘mixed use’.
Residential SDLT is paid on a residential property and the gardens and grounds. But when a property also comes with land that is considered to be outside the curtilage of the property and not integral to the amenity of the residential use, then the mixed use rates may apply. Typically equestrian properties could make use of this potential reduction, as non-residential assets may include grazing paddocks, farm land, agricultural buildings, stables, offices etc.
The SDLT rates vary between these two use classifications. Buying the property will be significantly cheaper if you can prove it is eligible for mixed use rates, particularly when you are considering properties of £925,000 or above. This is also the case if the property you are buying is not going to be your primary residence as there is a surcharge of 3% on second residential homes, which is not applicable on mixed used properties.
As an example of the savings that could be made, a property with a value of £1,200,000 would pay over £14,000 more in SDLT if the mixed use rate is not applied for. The residential SDLT would be £63,750 while the mixed use rate is £49,500. As property values increase, this difference is greater: the saving on a £2 million property is £70,000.
Each case is judged by HMRC on its merits and there is no concrete definition as to what constitutes a mixed use property. But if it can be proved that the property you are purchasing has both residential and non-residential elements then it should certainly be a consideration.
There is great potential to reduce the tax liability on you property purchase significantly. However, ti is the responsibility of the purchaser – not the vendor – to prove the property is mixed use. So it is important to think about the evidence that can be provided to HMRC.
Farm accounts, receipts for fertiliser, any leases or licences that may be in place are just a couple of suggestions that might help bolster the case.
Lydia Cox is a Member of the Royal Institution of Chartered Surveyors and a Fellow of the Association of Agricultural Valuers.