Help Please! on how to structure a property transaction

[charlottestax]

Thank you bd6759 for making the point about stock being held at the lower value.
From what you say, it appears the SDLT cannot be avoided in this way without incurring substantial corporation tax.

[charlottestax]

Stock: You are ignoring the fact that stock is valued at the lower of cost or NRV. Its not pick and choose.

CGT? Totally irrelevant. This is a trading activity. The company will be liable to corporation tax on the profits of the trade. That is why the property is stock.

Thank you.

I'd like advice on a new proposal please.

The property is intended to be converted/extended in to more than 6 flats. As such at some stage a sale or transfer to an SPV could become a non residential transaction as far as SDLT is concerned, and hence subject to less SDLT.

It appears the Land Registry will register the flats as long as the filing includes exact plans showing the 3 dimensional positions of the flats, even if they are not built at the time.

Once planning permission is granted and the flats are registered at the Land Registry, would HMRC require any further evidence before accepting that a transfer of the whole site at market value would be subject to non residential SDLT.

Thank you

[bd6759]

Once planning permission is granted and the flats are registered at the Land Registry, would HMRC require any further evidence before accepting that a transfer of the whole site at market value would be subject to non residential SDLT.

Thank you

I don't underatnd the question. Why would HMRC agree that the acquisition of a residential property was not the acquisition of a residential property?

[charlottestax]

Once planning permission is granted and the flats are registered at the Land Registry, would HMRC require any further evidence before accepting that a transfer of the whole site at market value would be subject to non residential SDLT.

Thank you

I don't underatnd the question. Why would HMRC agree that the acquisition of a residential property was not the acquisition of a residential property?

Quoting from

https://www.gov.uk/stamp-duty-land-tax/nonresidential-and-mixed-use-rates

"Non-residential and mixed use land and property rates
You pay SDLT on increasing portions of the property price (or ‘consideration’) when you pay £150,000 or more for non-residential or mixed-use land or property.
...
Non-residential property includes:
.....
6 or more residential properties bought in a single transaction"

The rates for these transactions are much lower than for residential transactions, especially with the new "2nd property" provisions.

Perhaps one purpose is for HMRC to give a tax break to developers who are evidently not purchasing for their own end use as a residence.

[bd6759]

But they are acquiring a single dwelling. What happens to that dwelling afterwards is not relevant,

[charlottestax]

But they are acquiring a single dwelling. What happens to that dwelling afterwards is not relevant,

That's helpful.

This is from the SDLT manual
https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00365
"In most cases, there will be no difficulty in establishing whether or not a property is residential property.
Use at the effective date of the transaction overrides any past or intended future uses for this purpose. If a building is not in use at the effective date but its last use was as a dwelling, it will be taken to be ‘suitable for use as a dwelling’ and treated as residential property, unless evidence is produced to the contrary.
Undeveloped land is essentially non-residential but may be residential property if, at the effective date, a residential building is being built on it.
Where, at the effective date, an existing building is being adapted or marketed for, or restored to, domestic use, it is treated as residential property."

There seems to be scope in here for the non residential rate to apply?

For example if the transfer took place at the point where planning permission had been obtained and:-

1) There are separate land registry leasehold titles for 6 or more apartments.
2) Demolition has taken place of an extension of the house where some of these new build apartments are to be built.
3) Interrnal demolition has taken place inside the main house (leaving the walls and roof without windows). Here other apartments are to be constructed, adjoining the new build apartments.

Thank you for your thougths.

[bd6759]

How are you going to prove that its last use, not all that long ago, was not as a dwelling.

By all means knock it down, but the cost of doing so will probably exceed the SDLT at stake (and the costs you incur will not be deductible by the company when working out its profits).