Buying land to extend garden – is there a way to avoid stamp duty?

Hmmm I am not sure what the rules are for just adding some land to your only existing property, but I am assuming your not talking about the extra 3% surcharge for second property purchases?

Not sure I understand your question. How much are you paying for the land and why do you think you should not have to pay SDLT?

Reply to the comment left by "Ian Narbeth" at "04/05/2017 - 11:03":

We are paying £48,000 for the land.

The reason for my question was to find out if there was a way in which we could purchase the land which meant we could avoid paying stamp duty on it.

Just to reiterate. It is a small area of unused land to the rear of our garden which is currently separated from our property by a 6ft wall. We would like to buy the land so that we can extend the garden, but equally to ensure that it is never built on.

Reply to the comment left by "Jane Abbott" at "04/05/2017 - 11:31":

I am not giving tax advice and you should not rely on this as such advice. I suggest you look at:
https://www.gov.uk/stamp-duty-land-tax/nonresidential-and-mixed-use-rates

You may be able to argue that at the end of the day of purchase you own just one residential property as the garden will be incorporated into your home. Alternatively, if the land can be classed as non-residential (or possibly as not a dwelling) you are not caught by the 3% additional tax.

Patrick Cannon QC who is a tax specialist has a useful article here:http://www.patrickcannon.net/uploads/documents/PC1692%20The%203%20per%20cent%20Additional%20SDLT%20Charge%2027%205%202016.pdf

Unfortunately for you the 3% SDLT on £48000 is such that it is not worth taking professional advice over.

It is called "Stamp Duty LAND Tax". SDLT isn't specifically related to buildings or homes, it's a tax on land transactions.

Unless there's some relief I'm not aware of, you may well have to pay, although I like Ian's idea above to avoid the 3% surcharge over £40k. It comes down to whether you can convince your solicitor that the 3% doesn't apply as you're simply extending your current residential property.

As far as I understand, the higher rate of SDLT applies to dwellings. Land is obviously not a dwelling.

Now, the Finance Act states that "Land that is, or is to be, occupied or enjoyed with a dwelling as a garden or grounds (including any building or structure on that land) is taken to be part of that dwelling."

But, to me this means land purchased as the same time as an additional dwelling ('that dwelling').

I would ask the solicitor to explain why he thinks the higher rate should apply.

Reply to the comment left by "Romain Garcin" at "08/05/2017 - 09:08":

OP doesn't mention 'higher rate SDLT"; she just wants to avoid SDLT altogether.

I would guess (but have no information to back this up) that the solicitor considers that the purchase is adding to the value of the current property and therefore the total value of the combined property should be considered to determine the SDLT payable on the £48K.

Reply to the comment left by "Michael Barnes" at "09/05/2017 - 15:40":

Hi Michael
I think it has to be the additional 3% for a second property. On a straight purchase by a first time buyer of land (and land includes a building) for £48,000 there would be no SDLT.

Reply to the comment left by "Romain Garcin" at "08/05/2017 - 09:08":

Thanks for all the feedback. This is what our solicitor said;

The first test for qualifying to pay the higher rate of tax is that you are purchasing a dwelling. I was hopeful that additional garden ground would not qualify as a dwelling but unfortunately upon investigation I have discovered that a dwelling also includes land that is to be occupied or enjoyed with a dwelling as garden or grounds. As I understand it you are going to use this land as part of the garden for your property. Therefore it qualifies.

There are then a series of tests which have to be met before you are obliged to pay the higher rate tax. The first is whether you have a major interest in a dwelling other than a new property you are acquiring. Of course you have a major interest in your home so unfortunately you meet this requirement. The next test is that the price that you are purchasing must have a market value of £40,000 or more which it does and that it must not be subject to a lease of an unexpired term of 21 years which it does not. Finally the garden must not be a replacement for your only or main residence which it is not. Therefore under all these tests you are acquiring a major interest in a dwelling which fall subject to the higher rates of tax.

To your point Romain, perhaps we can get around this by explaining the land is not being bought at the same time as the property which we already own?

Reply to the comment left by "Ian Narbeth" at "09/05/2017 - 17:36":

Hi Ian

We already own the property which adjoins the land, but this is the only property we own, so not sure if that makes a difference to what you said?

Thanks
J