DNS-Accountants

SDLT Agriculture

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 Stamp Duty Land Tax you may be required to pay.

Let’s start with the basics...

SDLT Agriculture

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:

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 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 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 advice, we could:

  • Save you thousands of pounds in SDLT during your agricultural acquisition.
  • Provide assurance that you pay only the necessary SDLT.
  • Avoid overpayment.
  • Identify any applicable savings or reliefs to reduce your tax bill.

Call us on 03300 886 686 or email on enquiry@dnsaccountants.co.uk.

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.

Speak with an expert

Any questions? Schedule a call with one of our experts.

About the author
Blog Author

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.

  • Book a free consultation
Receive accounting news and updates in your inbox

About the author
Blog Author

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.

DNS-Accountants

See how dns can help
you today.

Save tax
Save tax

Our experts will work with you to reduce your corporation, personal or any other tax liability, all within the rules of the UK tax legislations. We’ll ensure you’re claiming all allowances and expense claims that you would be elegible for.

Reduce your admin
Reduce your admin

We give free software to all of our clients. You’ll be able to raise sales invoices, snap pictures of receipts and be MTD compliant with ease. You can even manage your business anywhere there’s an internet connection, thanks to our mobile app!

Grow your business
Grow your business

Successful business owners are those that are on top of their numbers. Businesses are driven by the numbers behind them. If you’re not reviewing your profit & loss or balance sheet regularly, how would you know how your business has performed and how would you make proper business decisions? We can help you make sense of your numbers.

Free Business Software!

Limited time only!

Free Business Software

Say Goodbye to Bookkeeping Hassles: Nomi offers Free Receipt Processing and big savings!

  • Built in payment solutions.
  • Track profitability, debtors and creditors
  • Snap pics of receipts with the mobile app
  • Free Receipt Processing
  • Hasslefree Bookkeeping
  • Cost Reduction
Get Started
Close nomi