SDLTM00377A | Scope: what is chargeable: land transactions: residential property: the treatment of student accommodation (examples)

Example 1

Company A acquires a block of flats available only to students, where each floor consists of a lockable entrance door from a communal stairwell and behind it a number of individual study bedrooms, each with en-suite facilities, but only one communal kitchen and living area. This falls under category 2; therefore HRAD is not in point but MDR may be claimed for transactions prior to 1 June 2024. For the purposes of MDR, each floor (not each bedroom) within the block will be treated as used, or suitable for use, as a single dwelling. The same treatment would apply if the en-suite facilities were instead single shared bathroom facilities on each floor. S116(7) was an alternative to MDR prior to 1 June 2024, whereby the purchase of six or more dwellings in a single transaction is treated as non-residential for the purposes of SDLT. On or after 1 June 2024, where MDR is no longer available, s116(7) must be applied to transactions involving six or more dwellings.

For these provisions to apply, the building, or part of a building, must have been operating as student accommodation – other than a hall of residence – by the effective date of the transaction (EDT). HMRC will expect to see corroborating evidence of this restriction being in place at the EDT. Until a building, or part of a building, is actually in such use, the normal rules at FA03/S116(1) apply to determine whether or not it is residential property. In this example, should company C re-purpose the block after the EDT to allow non-students to reside there, HRAD will not become due. Only the interest acquired at the EDT will determine the charge to SDLT.

Example 2

For cases where the construction or adaptation process is still underway at the EDT, HMRC will expect corroborating evidence of the building’s intended use at completion. Any restrictions or conditions for use must exist at or prior to the EDT.

Company B acquires a construction site with planning permission to construct a block of flats. The planning permission was granted prior to the EDT but does NOT contain any clauses for the block to serve only students.

Provided that HMRC is satisfied that the construction process had in fact commenced prior to the EDT, this purchase would fall under category 3 and would be liable to HRAD regardless of the purchaser’s intention to let only to students.

MDR may be claimed for transactions prior to 1 June 2024 and the same considerations will apply as in Example 1, including those around s116(7).