The UK housing market is under tremendous pressure as hundreds of thousands of buyers rush to complete house purchases before the stamp duty holiday ends on the 31 March. We've already reported on the pitifully narrow timeframe – under three weeks – available to buyers who want to benefit from the stamp duty relief.
If you're reading and thinking, 'there no way I'll complete within this timeframe', you may want to check out these little-known intricacies of the stamp duty rules.David Hannah, Principle Consultant and Founder of Cornerstone Tax, gives expert advice on potential ways to save on stamp duty even if you don't hit the end-of-March deadline.
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1. Consider buying a 'commercial property'
One lesser known fact among homebuyers is that 'commercial activity' on your land turns your house into what's known as a 'mixed use' property, which in turn means you'd be paying the non-residential rate of stamp duty tax.
This does not mean your seller has to have run a business from the property, but rather whether the house (or its land) generates a business income. This comes in many forms, from having a commercial business operating on-site to renting or licensing part of the buildings or land to someone else to use (known as property business income in HMRC terms).
The important thing to note is that it doesn’t matter how little of the land is used or how small the income is. The fact that any of it is, is conclusive that you shouldn’t be paying, or have paid, the residential rate.
2. Consider allowing utility companies to lay equipment on your land
Wayleave Agreements essentially give rights to utility companies to install, place or run their equipment in or over the land that your property sits on, in order to provide power, water, or sewerage to the United Kingdom. In return for granting the right to use this land, the utility company will usually pay a fee, similar to a tenant paying rent to a landlord.
Therefore, this qualifies your property as a 'commercial use' one, and allows you to pay the lower non-residential stamp duty rate at the point of purchase.
3. Buy a home with a granny annexe
Granny annexes are not just for grannies and are growing in popularity as living arrangements for adult children moving back in with parents. The latest figures from the Valuation Office Agency show that there are almost 39,000 granny annexes in England and Wales alone – an increase of 16% in recent years.
One lesser known benefit of owning a property with a self-contained annex is that you could be eligible for Multiple Dwellings Relief, meaning you could pay a reduced stamp duty fee.
David Hannah, Principle Consultant and Founder of Cornerstone Tax, comments further:
'In an ideal world, the stamp duty holiday would be phased out slowly to avoid those who are currently in the process of purchasing their properties being thrown off a cliff-edge. However, if the government does not review this stamp duty holiday, and an extension is not announced, there are still ways that homebuyers can benefit from paying reduced stamp duty fees.
'Millions of properties across the UK could qualify for reduced stamp duty rates, if for example, they have a self contained side annex as part of the property, or they have granted access to utility companies to lay cables and pipes in or over their land. In these cases, solicitors have a duty of care to inform their customers of all potential stamp duty reductions, including where Wayleave Income and Multiple Dwellings Relief exist.'
