Should we be paying additional stamp duty?

[Rufus27]

We are in the early stages of buying a house. It’s a complicated matter due to the fact it’s a house that has not sold for 60 years and it’s a listed building.

There is an outhouse situated in the grounds right next to a stream (which can flood). The seller has requested that if this outhouse were to be developed in the next 25 years, he would get 25% of any profit made. We are fine with this as we aren’t intending to develop it (and don’t think we would get permission even if we wanted to!).

Our solicitor has now said there will be an extra fee for this to be put into the contract which is fair enough. However, she also says that we will have to pay extra stamp duty because of the potential for the outbuilding to be developed (ie more stamp duty than what would be expected for the amount we’ve agreed to pay). The seller’s solicitor disagrees and says we would not be liable for extra stamp duty.

Does anyone know who is correct? Has anyone been in this situation? If we were obliged to pay extra stamp duty, it would be a deal breaker so we are desperate to know which solicitor is correct.

Thank you.

I might be wrong but I always thought SDLT was based on purchase price and the buyers circumstances, not possible future development. Personally I don’t agree with overage contracts, why should previous owners still have an interest in the property they have sold, but that’s a whole different argument. Good luck.

Sorry, I don't know the answer.

A couple of questions, are you in England, Scotland, Wales or N Ireland? Is the seller a private seller and not a business.

Even if you aren't going to develop the outbuilding the '25% profit' condition might make it harder to sell the house at a later date if you have to sell. I'd try and avoid it if I could.

Thank you both. We are in England. It’s a private sale (sold through an estate agent ).

"...we will have to pay extra stamp duty because of the potential for the outbuilding to be developed"

Any future potential will not mean that extra stamp duty is payable. But there may be depending on what the outhouse is like at the moment.

Is the outhouse a separate dwelling? By this, I mean does it have a kitchen, a bathroom with a toilet and also some space for a bedroom. It's own electricity and/or gas supply?

If not, then forget about having to pay extra stamp duty.

If it does have all of the above, so basically somebody could move in there tomorrow and live there independently of the main house, then it is a separate dwelling. If this is the case then it is likely to already be separately assessed for council tax purposes.

However, from what you have said, it sounds unlikely that this is the case.

Even if it is currently a separate dwelling then as long as it is on the grounds of the main home and the value of the entire property that is attributable to the separate dwelling is no more than one third then there is no higher rate stamp duty to pay.

An example, You buy a large estate for £1.5M which includes a separate cottage (for staff or whatever). One third of £1.5M is £500k. As long as the staff cottage is worth no more than £500k then there is no extra stamp duty to pay.

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09755

So, you will not need to pay the higher rate of stamp duty, that is unless the outhouse is a separate dwelling and makes up more than one third of the value of the total property.