Do You Pay Stamp Duty Land Tax on Agricultural Land?

Stamp duty can be a complex area, however, if you’re wondering if you have to pay stamp duty land tax on agricultural land, the answer is, possibly. In this article, Partner in our Real Estate team, Joe Fletcher-Hunt, explains the ins and outs of stamp duty relating to agricultural land and assets.

When do you need to think about stamp duty land tax?

When the ownership of land changes hands, Stamp duty land tax (SDLT) must be considered and it may mean that a tax return needs to be submitted with no tax pay.

You must pay it when land or property is purchased, but different rates apply for residential, commercial and mixed-use assets. SDLT rules apply to property purchased in England and Northern Ireland and is enforced by HM Revenue & Customs (HMRC), with similar tax systems used in Wales (Land Transaction Tax) and Scotland (Land and Buildings Transaction Tax).

How much stamp duty land tax will you have to pay?

This is one of the questions that weighs heavy on clients and there isn’t a one-size-fits-all solution.

Usually SDLT is calculated using the value of the property concerned, however other factors can come into play, which are known as considerations. In most cases the value of the property equates to its purchase price. However, other payments can be regarded as considerations including goods, works, services or the release/waiver of a debt.

The property’s market value can also be used sometimes. For example, where land is gifted from an individual to their connected company, the tax is calculated on the market value.

It’s also worth noting that higher or additional SDLT rates can be applied if an individual owns more than one residential property or is a company purchasing a residential property.

The stamp duty land tax on a purchase of agricultural land (with no buildings) and forests is calculated using the commercial (non-residential) rates.

Residential rates (standard and higher) may apply if parts of the land have buildings on them, which are classed as residential buildings. The residential rates may also apply to agricultural land sold as part of dwelling including grounds or a garden.

Can you receive tax relief for SDLT?

In some cases, tax relief may be available. For example, a property being purchased may have more than one residential space (a farmhouse with neighbouring workers’ cottages). It may also be possible to claim multiple dwellings relief to reduce the tax bill. There are also a variety of niche reliefs available on properties purchased for occupation by agricultural workers.

What happens if I pay the wrong amount of Stamp Duty Land Tax?

If HMRC disagree with the amount of tax declared or tax paid, they will require the difference owed to be paid with interest. In some cases, financial penalties can be imposed if parties are seen to be carless or deliberately misleading when calculating the tax owed. Needless to say, given the sums involved it is important to get the calculation right.

With it being very difficult to give a rule of thumb on how to calculate SDLT, due to the rates and regulations changing regularly, it is safer to review each transaction on a case-by-case bases.

Speak to our Agricultural Property Solicitors about SDLT

If you are not sure about whether stamp duty land tax applies to your agricultural property or farmland, our property solicitors have a wealth of knowledge relating to agricultural property, and will be happy to assist. You can submit an enquiry via the form below, or give us a call to discuss your property matter.