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The rules around Stamp Duty Land Tax (SDLT) that is levied on agricultural property transactions and agricultural land transactions can be complex.
The SDLT rate in agricultural property and land can vary depending on the type of land, what the land is used for, buildings on the land, whether the properties are mixed use and the purchase price. Understanding SDLT when buying, selling or transferring farmland and properties can make a huge difference to the tax you pay.
In this blog, we’ll look at many elements that need to be considered when purchasing agricultural property or land and the SDLT on agricultural properties you may be required to pay.
Let’s start with the basics...
What is stamp duty land tax?
Individuals must pay Stamp Duty Land Tax (SDLT) if they buy a property or land over a certain price in England and Northern Ireland. There are different rules and taxes for Scotland and Wales as per below.
- Scotland - pay Land and Buildings Transaction Tax (LBTT).
- Wales - pay Land Transaction Tax.
You pay the tax when you:
- Buy a freehold property
- Buy a new or existing leasehold
- Buy a property through a shared ownership scheme
- are transferred land or property in exchange for payment, for example you take on a mortgage or buy a share in a house
What qualifies as agricultural land or property?
When submitting an exemption or applying for reliefs such as Agricultural Property Relief (APR - see more details below about APR), knowing what qualifies as agricultural land or property is very important.
For example, land and properties that would qualify for APR could be:
- Farm buildings/cottages/farmhouses.
- Land used for the growing of crops.
- Stud farms for breeding and rearing horses.
- Land currently not being farmed under the habitat scheme.
- Land not being farmed under the crop rotation scheme.
Properties that do not fall under the definition of agricultural property for APR could be:
- Commercial woodland.
- Wind farms.
- Barns, cottages etc. used for commercial letting to non-employees of the farm.
- Entertainment venues.
Understanding Stamp Duty Land Tax in agriculture
The complications with SDLT in agriculture are because different SDLT rates apply for residential property, non-residential properties and mixed use assets. Therefore, if you are buying agricultural land that also contains residential buildings or mixed use buildings then different SDLT rates may apply.
Let’s look at these three areas in more detail:
Residential property
Includes any dwelling that has been used as a residence or is suitable for use as one, such as a farmhouse.
Non-residential property
Non-residential property includes:
- Agricultural land that is part of a working farm or used for agricultural reasons.
- Property that isn’t suitable to be lived in.
- Any other land or property that is not part of a dwelling’s garden or grounds.
- Six or more residential properties bought in a single transaction.
- Forests.
- Commercial property, for example shops or offices.
The tax due on bare land and forests is calculated at the non-residential rate.
Mixed-use properties
Mixed-use properties have both residential and non-residential elements. For example, if you buy a farm that includes a farmhouse, this will be categorised as residential, however the farmland surrounding it, or the commercial buildings will be categorised as non-residential. In these cases, the SDLT will be calculated on the mixed-use property rate, which is typically lower than the residential rate and can lead to tax savings.
However, you pay residential rates of SDLT on agricultural land if it’s sold as part of the garden or grounds of a dwelling, for example a cottage with fields.
Whilst most transactions where there is a farmhouse, buildings and agricultural land will be classified as mixed use. However, it is worth noting that HM Revenue & Customs (HMRC) are now scrutinising claims for mixed use if it considers the property is not a working farm.
Multiple dwellings relief
The Chancellor announced changes to Multiple Dwellings Relief (MDR) on SDLT with this relief being abolished from June 2024.
From 1st June 2024 MDR will no longer be available in England, Ireland and Northern Ireland for transactions which complete, or which substantially perform after that date. However, MDR will still be available in Wales and Scotland.
Note: England and Northern Ireland are subject to SDLT, whereas Wales is subject to LTT and Scotland is subject to LBTT.
MDR means that where multiple linked purchases were made under a single transaction, you could claim Multiple Dwellings Relief on SDLT. This allowed the payment of tax on the average cost of one property multiplied by the number of properties bought.
In England, Ireland and Northern ireland, this takes away a previous significant opportunity for tax savings when purchasing agricultural land that had multiple residential properties.
Can you claim Stamp Duty Relief on agricultural land?
Most Stamp Duty payments will not be refundable, however, there are a few very specific circumstances which can result in a potential refund. This could be:
- If a transaction falls through.
- If you believe you have overpaid SDLT on a transaction.
- If the land is designated as a heritage asset or has significant historical or cultural value.
How dns can help with advice and support on Agricultural SDLT planning
The SDLT rules can be complex, so it’s worth seeking expert guidance from dns accountants to find out the exact amount of SDLT you will need to pay. by seeking professional SDLT Experts advice, we could:
- Save you thousands of pounds in SDLT bill during your agricultural acquisition.
- Provide assurance that you pay only the necessary SDLT.
- Avoid overpayment.
- Identify any applicable SDLT reliefs and exemptions to reduce your tax bill.
Frequently asked question on SDLT for agricultural property
The simple answer to this is yes. However, typically, if the land you’re buying has a farmhouse or other residential property on it, SDLT will be payable at the residential land rates. If you purchase agricultural land that has no dwellings, it will be classified as non-residential.
If you buy a farm that includes a farmhouse, this will be categorised as residential, however the farmland surrounding it, or the commercial buildings will be categorised as non-residential. In these cases, the SDLT will be calculated on the mixed-use property rate, which is typically lower than the residential rate and can lead to tax savings.
This will depend on how the land is categorised and if it contains buildings. If it’s purely a purchase of land with no dwellings, then the SDLT will come under non-residential SDLT rates.
You pay Stamp Duty Land Tax (SDLT) on increasing portions of the property price (or ‘consideration’) when you pay £150,000 or more for non-residential or mixed (also known as ‘mixed use’) land or property.
SDLT rate for non-residential properties or mixed-use purchases are:
Note: These should be added in table format
| Property price | SDLT Rate |
|---|---|
| Up to £150,000 | Zero |
| The next £100,000 (the portion from £150,001 to £250,000) | 2% |
| The remaining amount (the portion above £250,000) | 5% |
You must still send an SDLT return for most transactions under £150,000.
The rules around gifts can be complex and it will depend on individual circumstances and how and when you make the gift.
Generally, transfers of property made according to the will of a deceased owner do not attract SDLT.
The gifts of money, property or land can also be placed in a trust made in a lifetime, or created in a will upon death, and your trustees decide who benefits, when they benefit and to what extent they will benefit from the assets in the trust. SDLT will not be payable in these circumstances.
Whether SDLT is due on a gift will depend on whether there is a chargeable “consideration”. If there is a mortgage outstanding on the property that will be taken over by the new owner, then SDLT would apply to the debt.
If someone gifts land or property in return for services provided or work completed, then SDLT would apply.
Agricultural Property Relief (APR) is a relief from Inheritance Tax (IHT) on the transfer of ‘agricultural property’. The relief is available at either 100% or 50% against the agricultural value of the property, depending on the type of property being transferred.
While it does not directly affect SDLT, it is an important consideration in estate planning and property transactions.
The relationship between the transferring parties also needs to be considered.
If land is gifted from an individual to a company and the person is “connected” to the company, then SDLT would also be due and be calculated on the market value of the property transferred. The definition of a connected person covers relatives and people who have some involvement with the company concerned.
If parties are connected through a business partnership or are within the same family group, different exemptions and valuation rules can apply.
SDLT can be complex when purchasing agricultural land and property, so its best to seek advice from a tax expert before you undertake a transaction The dns team have wide experience of advising clients on SDLT for agriculture and can assist you in many ways.
Call us or email for more help and advice on SDLT for agricultural purchases.
Any questions? Schedule a call with one of our experts.
Siddharth Agarwal
I am a Chartered Tax Advisor (OMB) and ACCA. I have 9+ years of experience in owner-managed business taxation issues, company reorganisations, property taxation, and succession planning.
I also work with private clients on bespoke tax planning strategies for trusts, residence status, and non-residents.
I aim to fulfil my professional duties towards my clients and keep them satisfied, my utmost priority. I believe in establishing and maintaining businesses and personal relationships as the key to mutual growth.
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Siddharth Agarwal
I am a Chartered Tax Advisor (OMB) and ACCA. I have 9+ years of experience in owner-managed business taxation issues, company reorganisations, property taxation, and succession planning.
I also work with private clients on bespoke tax planning strategies for trusts, residence status, and non-residents.
I aim to fulfil my professional duties towards my clients and keep them satisfied, my utmost priority. I believe in establishing and maintaining businesses and personal relationships as the key to mutual growth.
