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The UK government has issued updated guidance on the 17% Stamp Duty Land Tax (SDLT) rate applicable to high-value residential properties acquired by corporate bodies, with important implications for developers, property traders, and institutional investors.
Until 31 October 2024, specific corporate entities defined as ‘non-natural persons’ face a flat 17% SDLT rate when purchasing residential properties worth more than £500,000. These include companies, partnerships with corporate partners, and collective investment schemes. However, there are notable carve-outs that can mitigate the tax burden.
Entities acting as trustees of settlements are not subject to the 17% rate. However, they may still be liable for the Annual Tax on Enveloped Dwellings (ATED) if the property’s value and use meet certain thresholds.
Relief Mechanisms
The UK tax code allows several reliefs from the 17% SDLT rate, provided strict criteria are met. These include cases where:
- The property is used in a qualifying property rental business
- The buyer is a property developer, trader, or a financial institution acquiring in the course of lending
- The property is used in a public-facing trade or occupied by employees
- The purchase is made by a qualifying housing co-operative
- The property is a farmhouse for business use
Each relief category requires that the purchaser can demonstrate compliance with usage rules at the time of acquisition and in the post-acquisition period.
Ukraine Sponsorship Scheme Extension
Significantly, existing reliefs will not be withdrawn where properties are occupied by individuals under the Homes for Ukraine Sponsorship Scheme or those later transferred to the Ukraine Permission Extension Scheme. This ensures continued relief eligibility and reflects the UK government’s commitment to humanitarian support through tax flexibility.
Property owners must take immediate and consistent steps to utilize properties in alignment with these schemes to retain relief.
Additional Surcharges
Beyond the 17% charge, corporate purchasers must also consider:
- A 5% corporate buyer surcharge on all residential acquisitions
- A 2% non-UK resident surcharge, effective since April 1, 2021, which applies on top of all other rates
This layering of surcharges can result in an effective SDLT liability exceeding 24% in some scenarios, underscoring the importance of proactive tax planning and precise structuring in property transactions.
As the deadline of 31 October 2024 approaches, real estate-focused corporate bodies are urged to review their acquisitions for compliance, relief eligibility, and exposure to compounded SDLT rates.
