Guidance in relation to part 67-75 of the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017 in relation to Land Transaction Tax interpretation provisions.
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LTTA/1010 Meaning of major interest
A major interest in land is:
- an estate in fee simple absolute (a freehold interest), or
- a term of years absolute (a leasehold interest)
whether in law or in equity.
For the purposes of the LTT higher rates, paragraph 29 of Schedule 5 clarifies that the transfer of beneficial interests (for example undivided shares) arising under a trust in a residential property will be treated in the same way as a transfer of a major interest, where the seller of the beneficial interest was:
- immediately prior to the transaction, deemed to own the major interest in the dwelling, and
- immediately after the transaction the buyer is deemed to own the major interest.
LTTA/1020 Meaning of subject-matter and main subject-matter
The subject-matter of a transaction means the chargeable interest acquired in the land transaction (the ‘main subject-matter’) including any interest or right appurtenant* or pertaining to it that is acquired with it (relating to the main subject-matter).
* ‘Appurtenant’ means any right or restriction which goes with that property, such as an easement to gain access across adjoining land owned by another, or a covenant i.e. agreement to refrain from an activity for the benefit of the adjoining land.
For example, the transfer of a freehold and the transfer or creation or variation of a related right of way is chargeable as one transaction rather than 2 as the right of way is part of the same subject-matter.
In most cases the transaction will include a single registered title for the property and land. In some cases, a transaction may contain several registered titles for what, is in effect, a single property, made up of a property and its land.
The consequences of selling a property and its land as a single transaction, made up of several registered titles is that there are in effect several chargeable interests that as a general rule would be considered as linked transactions. The WRA would expect the tax treatment to match the treatment that would apply had a single registered title covering the same property and land been the subject of the transaction. Therefore one would not expect a tax advantage to arise from dividing a property and its land into separate titles if those titles form part of a single transaction or series of linked transactions.
LTTA/1030 Meaning of market value
Market value for LTT is determined in the same way as for the purposes of sections 272 to 274 of the Taxation of Chargeable Gains Act 1992.
Where the consideration for a land transaction is satisfied by the transfer of an asset, services or other non-monetary consideration, the market value of that asset etc. will be the price which the asset etc. might reasonably be expected to have cost in the open market. This is the case even where consideration is given.
The market value of an asset etc. does not normally include Value Added Tax (VAT) even if VAT is chargeable on the transfer of the asset etc. This is because market value is based on a hypothetical transaction, not on the actual transaction. However, there are in LTT a number of circumstances where the amount of VAT actually paid, or notionally payable, by the taxpayer on the transaction must be added to the market value established. These rules apply in relation to the calculation of chargeable consideration for:
- carrying out of works, and
- the provision of services.
Where the amount of the chargeable consideration needs to be established using a market valuation it is the buyer’s responsibility to provide it and the WRA will not prepare, or agree before a return is made, valuations for a taxpayer.
The valuation of assets etc. can be a complex matter requiring professional qualifications. In taking reasonable care in filing their tax return, a taxpayer may want to consider obtaining a valuation from a person competent to do so and who has been instructed to provide a valuation for the purpose of the tax legislation. If a tax return contains errors relating to valuation, a failure to instruct an appropriately qualified valuer may be relevant to assessing whether there should be a penalty and the type of penalty. Appropriate evidence of the valuation should be retained. Where the WRA needs to establish a valuation, or wishes to check a taxpayer’s valuation, it will employ a professional valuer.
LTTA/1040 Meaning of effective date of transaction
The effective date of a transaction determines when a liability to LTT arises. It also determines when the filing obligations arise.
The general rule is that, except as otherwise provided, the effective date of a land transaction is when that land transaction is completed.
There are important exceptions to this general rule:
- substantial performance (LTTA/2150)
- options and rights of pre-emption (LTTA/2240)
- agreement to lease (LTTA/4100)
In cases where the taxpayer is entering into a lease that continued after a fixed term or a lease granted for an indefinite term (LTTA/4030) where the return asks the taxpayer to enter the effective date of the transaction, please use the day after the end of the period for which the lease is treated as continuing.
In cases where the taxpayer is entering into a rent reconsideration (LTTA/4090) where the return asks the taxpayer to enter the effective date of the transaction, please use the day after the day of the rent reconsideration.
LTTA/1050 Meaning of residential property
Residential property is defined as:
- a building, or part of a building, that is used or suitable for use as one or more dwellings, or is in the process of being constructed or adapted for such use
- land that is or forms part of the garden or grounds of such a building (including any building or structure on such land)
- an interest in or right over land that subsists, or is to subsist, for the benefit of such a building or such land.
For most taxpayers it should be obvious when they are acquiring residential property. For example a building that has been in use as a dwelling up until the point of sale, including the garden or grounds will clearly be residential property. A chargeable transaction is a residential property transaction and subject to the residential property LTT rates and bands where the property transferred consists entirely of an interest that is residential property.
Where the property transferred does not consist entirely of an interest in residential property then the non-residential property LTT rates and bands apply to that transaction.
In cases where a building contains a dwelling and something else (e.g. a shop with a flat above it), or where the dwelling has land that is not part of the garden or grounds (e.g. a farmhouse with farmland), the treatment will be that the building acquired is either itself a mixture of residential and non-residential property, or is part of a transaction that includes both residential and non-residential property, and therefore the interest is not solely of residential property and the non-residential LTT rates will apply to the transaction.
It is worth noting that, as explained in the higher rates section of the guidance, the acquisition of a non-residential property that includes a dwelling isn’t chargeable to higher residential property LTT rates and bands. However this doesn’t stop the dwelling part of that acquisition being subsequently taken into account as a dwelling when assessing how many dwellings a person holds for the purposes of the higher rates rules.
LTTA/1051 Is the building a dwelling?
The use (or suitability of use) of the property as a dwelling is to be assessed at the effective date of the transaction. If, at that date, the property is used as a dwelling or is suitable for use as a dwelling, then it is a dwelling. It is not necessary for the seller to be in occupation on the effective date of the transaction for the building to be used as a dwelling. The buyer’s proposed future use of the building does not, of itself, determine the building’s current use or suitability for a different future use.
To determine whether a building is a dwelling or suitable for use as it will be helpful to consider the physical configuration of the building. No single factor will determine whether a property is a dwelling; different factors must be taken into account. Indicative factors include:
- a toilet and washing facilities
- accommodation for both ‘living’ and sleeping
- a kitchen
Other factors include the property’s treatment for the purposes of local government finance or status under planning laws, discussed later in this section.
Where an individual taxpayer acquires:
- residential property with more than one dwelling within its boundary, and
- where one of which is to replace their main residence or where they own no other dwellings,
higher rates may not apply to the transaction if certain conditions around principal and subsidiary dwellings are met.
See our guidance at LTTA/8080 for more information on subsidiary dwellings.
Treatment for purposes of local government finance and status under planning laws
In considering the use (and suitability for use) of a building, it can be helpful to have regard to the building’s treatment for the purposes of local government finance and its status under the planning laws.
A building will often be subject to Council Tax or Non-Domestic Rates (or in some cases both) depending on whether or not the building is being used or is suitable for use for residential or business purposes. The general assumption is that the actual use of a building will follow the permitted use of the building.
For example, if an entire building is being used at the effective date of the transaction as an office, then it is likely that Non-Domestic Rates (NDR) are being paid and the building is permitted to be used as an office. In the event that the building is being used as an accountant’s office but the building can only properly be used for residential purposes, then the building will still be treated as suitable for use as a dwelling, and the residential rates of LTT will apply.
If, in order to convert an office (or change its use) into a dwelling, appropriate permission from the relevant planning authority is required, then the absence of that permission at the effective date of the transaction would be a strong indicator that property is not suitable for use as a dwelling, even if little physical alteration would be required to make it habitable (for example an office located in a converted townhouse). As such the building would be a non-residential property.
That does not necessarily mean that the existence of appropriate permission, at the effective date of the transaction, to use a non-residential property as a dwelling means that the building is suitable for use as a dwelling. It will still be necessary to consider whether the building is physically suitable for use as a dwelling. If significant construction or adaption of the building would be required to make it suitable for use as a dwelling, then that is an indication that the building would not be suitable for use as a dwelling prior to the carrying out of that work. If, on the other hand, a dwelling house is unoccupied and is instead used temporarily by the seller to store goods (stock) for resale, then, assuming no change of use consent is required to continue to use the building as a dwelling in future, then this will be residential property. During the period that the building was being used as a temporary stock room, it is still subject to Council Tax rather than NDR and is only suitable for use as a dwelling.
Planning permission may not be required to home work or run a business from home, provided that the dwelling house remains a private residence first and business second (or in planning terms, provided that a business does not result in a material change of use of a property so that it is no longer a single dwelling house).
Therefore the fact that a business is carried on from a building does not prevent the building from either being used as a dwelling or suitable for use as a dwelling. For example converting a room into an office does not prevent the building from being residential property if the rest of the property is used as a dwelling or the building is suitable for use as a dwelling, because no permission would be required to continue to use the building as a dwelling. The building will be subject to Council Tax rather than NDR given its primary use is as a dwelling.
However, it should be noted that a building will be a dwelling if it is in the process of being constructed or adapted for use as a dwelling (see LTTA/1052).
Bed and breakfasts, guest houses and holiday lettings
Where a building has been used partly for residential purposes and partly for another purpose, its overall suitability for use as a dwelling will be influenced by the primary use to which the property may be put.
For example a building in use as a bed and breakfast or guest house will be a residential, mixed, or non-residential land transaction based on the facts in each case. The current use of the building, taking into consideration the planning permission requirements if there was to be a change of use to a dwelling, as well as whether the property is subject to Council Tax and/or NDR will be a strong indicator in these types of cases as to the suitable use of the property acquired. Therefore:
- if Non-Domestic Rates are payable and the rest of the property cannot or should not be used for domestic purposes, then the property is likely be considered to be non-residential
- if non-domestic rates and council tax are payable on the respective business and residential parts of the house, and permission would be required to convert the entire house into a dwelling house, then the property is likely to be considered to be of mixed use and the non-residential rates will apply
- if only council tax is paid, perhaps because the provision of bed and breakfast accommodation is secondary to the primary residential use (as would also potentially be the case of a home office) and the house should only be used as a dwelling house, then the property is likely to be considered to be suitable for use as a dwelling and will be residential property.
A property used as part of a furnished holiday letting business will be a residential property whether the property is assessed to Council Tax or NDR, as in most cases the building could be used as a single dwelling house without permission from the relevant local authority.
The legislation identifies certain properties that are to be treated as a dwelling and certain properties which are not to be treated as a dwelling (see the definition of non-residential property below).
Those which are treated as dwellings for LTT purposes are:
- residential accommodation for school pupils
- residential accommodation for students (other than halls of residence for students in further or higher education)
- residential accommodation for members of the armed forces
- an institution that is the sole or main residence of at least 90 per cent of its residents (and does not fall within any of the descriptions below of buildings not treated as dwellings below).
It should be noted that a dwelling acquired with the intention of letting to students is not residential accommodation for students (other than halls of residence). There must be some characteristic over and above the intended (or already existing) tenants to make a property one that is residential accommodation for students. The planning permissions for such a property will be important. For example, a block of flats may have a planning restriction that means that they may only be let to students.
Derelict properties and removal of fixtures and fittings
Finally, a residential property that is no longer habitable as a dwelling, perhaps because it is severely structurally damaged for example, would not be residential property, on the basis that it is not suitable for use as a dwelling. However, there is a clear distinction between a derelict property and a dwelling that is essentially habitable, but in need of modernisation, renovation or repair, which can be addressed without the requirement of changing the structural nature of the property. In the latter cases if the building was used as a dwelling previously and permission to use as a dwelling continues to exist at the effective date of the transaction, then it will be a residential property. Whether a property is derelict is a question of fact and should apply to only a small minority of buildings. A property exempt from council tax does not hold a bearing on the LTT chargeable on the property.
Properties requiring modernisation, repairs or renovation
It is normal for a part or parts of a property to wear out over time and require some replacements, however this does not necessarily make the property derelict. A normal repair as part of the general upkeep of the property would include repairs not limited to:
- fitting of kitchen or bathroom facilities
- repairing or Replacing windows
- repair work to roof including a re-slate, re-tile or re-thatch
- reconnection to utilities such as fitting of boiler for heating and replacement of piping to access water
The removal of, for example, a bathroom suite or kitchen facilities before sale will not be regarded as making a building unsuitable for use as a dwelling. These are internal fittings and would not constitute infrastructure changes to the dwelling that would mean the building is no longer suitable for use as a dwelling. A new kitchen or bathroom suite could be fitted relatively quickly and cheaply and are common improvements to a dwelling. Likewise substantial repairs to the windows or the roof would also not make the building not suitable for use as a dwelling.
Mr A and Mrs A purchased a 3 bedroom terraced property. On the effective date of the transaction, there was no running water or central heating system. There was floor damage in the kitchen and there was wet rot to the rear of the property. There was no bathroom in the property. Whilst the property had some damage, the property was safe to inhabit despite needing some repair work:
- the property could be reconnected to a water supply
- the supporting timbers could be repaired through wet rot treatment and/or some timbers could be replaced
- the floor damage to the kitchen is cosmetic and could be repaired or replaced. Equally, if Mr and Mrs A did not want to refurbish this, it would not make the property derelict
- a new bathroom suite can be fitted relatively quickly and is considered a common improvement to a dwelling
Therefore, this property is likely to be residential property and chargeable to the residential rates of LTT as the property could be repaired without requiring extensive replacements to the structure of the property.
Miss B buys a property which has been vacant for a number of years. It has an old-fashioned kitchen and bathroom suite which required modernising. The building itself is structurally sound and the roof is intact. There was no circuity or pipework in the property so there was no access to heating or access to water and gas. The property had been vandalised and suffered some fire damage in the living room, although the damage was confined only to the interior fittings and flooring. As such, Miss B was unable to obtain a mortgage on the property.
Whilst the property had some damage, the property was safe to inhabit in spite of needing some repair work.
- a new kitchen and bathroom suite can be fitted relatively easily and quickly and is a common improvement
- the property could be reconnected to water, gas through the installation of new circuitry and piping
- the fire had not caused any structural damage to the property
- the inability to obtain a mortgage is a decision made by a third party such as a bank, and this does not influence whether a property is a dwelling or not for LTT purposes
This property is likely to be residential property and chargeable to the residential rates of LTT.
Mr C purchases a detached property. At some point, there had been a water leak causing some water damage to the flooring, insulation and some of the circuity. There was also damage to the ceiling where water had been retained. The building itself is still structurally sound.
Whilst the property had some damage, the property was safe to inhabit and repairable. The wet damage could be resolved through the removal and replacement of the wet flooring and insulation. Any damaged circuity could be easily replaced. This property is likely to be residential property and chargeable to the residential rates of LTT.
Properties in severe disrepair requiring structural alterations to make a dwelling habitable
Where the damage to a dwelling is beyond the extent that normal repair work, replacement or modernisation can resolve it, the property may be considered as derelict depending on the severity of the damage. In such cases, repair work will be on a greater scale. Where a property has deteriorated so badly, the repair work would need to repair the structural integrity of the property as without the repair it would be deemed unsafe to live in it is likely to viewed as non-residential property. Repairs to the interior of the property are unlikely to fall within this category unless it is in addition to repairing structural defects that are hazardous without repair.
Mr D and Mrs D purchase a farmhouse. On the effective date of the transaction, the farmhouse had severe structural damage and required replacing of some of the timbers supporting the property. The roof had fallen in places, so the interior of the property had been exposed to the elements. The floors and ceilings upstairs were rotten and had given way in places. Access to the property was not secure and required installation of windows and doors. The property had never been connected to the mains electric or mains water and there was no sign of connection to sewerage pipes. There was no bathroom or kitchen. As the property requires extensive rebuilding of its structure to make it safe to live in, this property is likely to be viewed as derelict and chargeable to the non-residential rates of LTT.
Mr E purchases a property which was formerly used as a dwelling. At some point in its history it had suffered severe fire damage, and not lived in since. As a result, there is no floor upstairs, and the circuity and pipework through the house cannot be used. All doors and windows are missing. There is visible structural damage to the building, and a survey has been conducted which says the property is structurally unsafe.
This property is likely to be viewed as derelict and chargeable to the non-residential rates of LTT.
Ms F purchases a bungalow that has not been lived in since 2014. The circuity and pipework through the house had been removed at some point prior to the purchase. A survey on the property confirmed the presence of asbestos. The only means of removing the asbestos was to dismantle the property in its entirety and as such extensive replacements would not bear any relation to the type of structure that was originally supporting the property.
Whilst the circuity and pipework through the house can be replaced and the presence of asbestos does not prevent re-occupation or renovation, because the structure of the property required dismantling to remove the asbestos, it is likely be viewed as derelict and chargeable to the non-residential rates of LTT.
LTTA/1052 Construction or adaption for use as a dwelling
It is an objective test as to whether a building is in the process of adaption or construction for use as a dwelling at the effective date. Intention alone would not be sufficient. For example, obtaining planning permission for a building would not necessarily change the status of the building, if work on the property in line with the planning permission had not yet commenced at the effective date. However if adaption or construction had taken place at the effective date, then clearly the planning permission would be a strong indicator of what the building is being adapted for use as (e.g. is the permission to convert or adapt the building to a dwelling, or into a commercial property?).
Residential properties that are in the process of being constructed may be treated as dwellings at the point when walls begin to be constructed upon the foundations. Those walls do not have to be above ground level. Where walls have started to be built at the effective date the land will be residential property if the building being constructed is to be a dwelling.
Where a building includes a number of dwellings (for example, a block of flats), all the dwellings in the building will be treated as being in the process of being constructed when the walls begin to be constructed, not when construction of each individual dwelling is commenced. This principle applies even if the ground floor is intended for non-residential use (for example, where the building consists of a shop with flats above). This will apply where a single, or multiple dwellings are sold. However, where the incomplete building is one that is for mixed use and the whole of the site is sold in a single transaction then the non-residential rates will apply.
This will mean that a bare piece of land sold to a property developer will be non-residential land. If that developer were to sell the land after commencing the build of the properties, and none or some of the properties have reached the point of amounting to the construction of walls, then the transaction will be either one that is a non-residential, or a mixed, property transaction and will need to be assessed using the non-residential rates of LTT.
Acquisition of six or more dwellings
Where all the dwellings being constructed have reached the point where walls are considered to be in the process of being constructed, the transaction will be a residential property transaction and, the taxpayer may make a claim to multiple dwellings relief or opt to have the transaction treated as non-residential in the event that the transaction consists of 6 or more such dwellings.
Where the construction work has resulted in some, but not all, of the dwellings being in the process of being constructed then the taxpayer may claim multiple dwellings relief in relation those dwellings and non-residential rates in relation to the rest of the land.
Off-plan property purchases
Where a taxpayer buys bare land that has:
- planning permission for a dwelling, and
- construction of the dwelling has not begun, and
- the seller is under no obligation to build a dwelling
then the purchase will be taxed at the non-residential rates of LTT.
This is in contrast to where an off- plan purchase that comprises both the land and a contract for the construction of a dwelling. This will be treated as a residential property transaction.
It should be noted that there are special rules for off-plan property acquisitions in relation to whether they are deemed to be an acquisition or holding of a dwelling for the purposes of the higher rates rules (see LTTA/8050 for the higher rates rules and LTTA/7040 for relief for acquisitions involving multiple dwellings)
LTTA/1053 Garden and grounds
An acquisition of bare land will generally be a non-residential transaction. Whereas a transaction is likely to be residential if at the effective date the purchased land:
- forms part of the garden or grounds of a dwelling
- is for the benefit of the dwelling
How to determine if land is garden or grounds
It will be a question of fact. In most cases, land attached and acquired with a dwelling will be garden and grounds, making it residential.
However, land does not have to be acquired with a dwelling for it to meet these conditions. Land acquired separately from a dwelling needs to be assessed at the ‘effective date’ to determine if it’s residential or not.
A homeowner sells their garden to a developer. The purchase is a residential property transaction.
The developer then decides to build a small warehouse on that land and sells the warehouse to a local business.
The second purchase of the land, including the warehouse, is a non-residential property transaction. Because the land sold no longer forms part of the garden or grounds of a dwelling, nor does it subsist for the benefit of the dwelling.
Whether land forms part of the garden of grounds of a dwelling, (including any building or structure on such garden and grounds) or subsists for the benefit of the dwelling will be a question of fact depending on the individual circumstances of each case. For most dwellings, it will be clear what are:
- the gardens or grounds of that dwelling
- those parcels of land that are not
Where there’s some question over this, it will be helpful to consider whether the land has been used to conduct a business or trade.
Land does not have to be actively in use for it to be classed as either garden and grounds or as non-residential land. Its last use is indicative of its nature.
Farming and rural land
As stated, in most cases, land attached to a dwelling will be treated as garden or grounds. The main exception to this is farmland, which is clearly neither garden nor grounds of a farmhouse.
Farmland is likely to have been exploited by commercial machinery. At the effective date it would be hard to class this land as garden or grounds.
But land not commercially used will be considered gardens, or ‘grounds’.
Grounds could include a property with stabling for horses used for the seller’s or their friends and family’s personal use. Where the land (not constituting a garden) would amount to grounds, this would make the whole of the land and buildings sold residential.
Tests to help decide if land is not part of garden and grounds
There will be some cases where it’s not as clear whether land:
- forms part of the garden and grounds of a dwelling, or
- is non-residential
The following indicative factors may help to determine whether land has been used to conduct business or trade. If so, it will be non-residential.
These tests should apply to how the seller of the property used the land.
1. Has there been an activity undertaken on the land done so earnestly to pursue business interests instead of undertaken for pleasure, enjoyment or convenience?
For example, a working sheep farm producing meat, milk and wool is more likely to meet this test. Whereas, a dwelling with some small fields within its boundary under a grazing agreement is not.
Similarly, a house that’s purchased with land as an investment with the hope of selling that land for a profit later is unlikely to meet this test.
2. Has the activity undertaken on the purchased land been undertaken on sound and recognised business principles?
This means there has been genuine economic or commercial use of land. Examples of recognised business principles include:
- accurate record-keeping
- being VAT-registered (where appropriate)
- having contracts in place for the supply of goods and services
3. Has the activity undertaken on the land had a reasonable prospect of profit and the intention of generating a reasonable income relative to the land value?
For example, a dwelling is acquired with a neighbouring field that the previous owner had used to keep chickens. The previous owner sold both eggs and chicks, from which she gained a reasonable income but ran at a loss. This is unlikely to be viewed as a business undertaking and is likely to make the land residential.
4. Has the activity undertaken on that land been done so with reasonable continuity?
For example, a dwelling purchased with a nearby field used as a campground for only a couple of weeks a year, coinciding with a festival event, is unlikely to be classed as non-residential.
5. How is the land viewed by other public authorities?
For example, land that receives rural payments is more likely to be classed non-residential than land that does not. For this test to be met the rural payment should be paid on the basis of the purchased land alone. Where a small amount of land, which is too small to qualify for a rural payment in its own right, is used by a neighbouring farmer under a grazing agreement. And that land is combined with the neighbouring farmers’ own land to qualify for a rural payment. This is unlikely to meet the test.
Land that’s exempt from Council Tax or Non-Domestic Rates (NDR) as it’s deemed agricultural is more likely to be viewed as non-residential than land that does not have such an exemption.
6. Has the local authority granted planning permission or other permissions or licences indicative of a business use of the land?
For example, a campsite will have:
- planning permission for the construction of toilet and washing facilities
- a licence from the local authority to operate as a campsite
Buildings on the land
Buildings on the land must be included when considering whether a property is residential or mixed/non-residential. If those buildings are in the garden and grounds of the dwelling, then the use or suitable use of those other buildings is not relevant.
If a garage within the grounds of a dwelling is converted into an office, then this alone will not prevent the land and the office from being part of the dwelling’s gardens. It would be residential property.
But if the use of those buildings is strongly indicative of a business use, for example, they’re subject to NDR, then the transaction will be subject to the non-residential rates of LTT as it will be a mixed transaction.
Land that subsists for the benefit of a dwelling
Land that subsists, or is to subsist, for the benefit of the dwelling is also taken to be part of the dwelling. This applies to an interest in land which is not attached to the dwelling and its garden or grounds.
- A garage sold with the dwelling but that’s physically separate from that dwelling.
- A person purchasing a flat with an allocated parking space or a house with a garage in a block of garages from the same person will have entered into a residential purchase.
- Where grounds have been split by a public highway.
However, where the land had ceased to subsist for the benefit of the dwelling at the effective date of the transaction, this will not be a residential transaction.
A garage that belonged to a dwelling was sold several years ago to a separate buyer. That buyer owned several garages, but none of the dwellings to which the garages used to belong. When the block of garages is sold, this will be a non-residential transaction.
Rights of way, easements and fencing
The fencing off of a part of a garden or grounds or a public footpath crossing garden and grounds does not change the nature of that land unless the dwelling owners no longer had rights of use or access to it.
The acquisition or removal of rights of way and easements will also be the acquisition of residential land if the right subsists for the benefit of a dwelling. Therefore, payments made to acquire or remove a right of way or easement that benefits a building that’s used or is suitable for use as a dwelling will be liable to the residential rates of LTT.
LTTA/1060 Meaning of non-residential property
Non-residential is defined in the negative – it is any land and buildings that is not residential property.
However, the following are confirmed to be the non-residential use of buildings:
- a home or institution providing residential accommodation for children
- a hall of residence for students in further or higher education
- a home or institution providing residential accommodation with personal care for persons in need of personal care by reason of old age, disablement, past or present dependence on alcohol or drugs or past or present mental disorder
- a hospital or hospice
- a prison or similar establishment
- a hotel or similar establishment
Specific inclusion, as non-residential property, of the above buildings provides clarity for the treatment of the buildings for LTT purposes. In the absence of this specific rule the buildings would, potentially, meet the definition of a dwelling.
LTTA/1070 Meaning of dwelling
A dwelling is a residential property that comprises a single dwelling. What constitutes a dwelling is a question of fact, access to private cooking and bathroom facilities will be important in establishing whether a dwelling is a single dwelling. This will mean that a house of multiple occupancy will not be treated as a number of single dwellings if the property lacks private cooking (e.g. fitted kitchen) and bathroom facilities for all occupants.
LTTA/1080 Meaning of connected persons
A connected person is, broadly, a person where there is a connection between the taxpayer and that other person:
- for an individual, a familial tie, such as spouses, siblings, ancestors and descendants, and
- in relation to companies where a company is able to exercise control over another company (or such control can be exercised), or where an individual is able to exercise control over a company. In both cases that control is to be considered both directly and indirectly
The LTT definition of connected persons is dependent upon section 1122 of the Corporation Tax Act 2010.This is a complicated area of UK taxation and as the legislation defining who are connected persons, and the guidance related to it, are based on legislation under the authority of the UK government this guidance provides links to the relevant legislation, and to the relevant HMRC guidance. Please note that the WRA cannot guarantee that the links are correct at the date that they are viewed.
The following HMRC guidance may be helpful in establishing whether persons are connected to each other or whether one company is under the control of another.
LTTA/1090 Meaning of child
For the purposes of LTT, ‘child’ means a person under the age of 18.
LTTA/1100 Meaning of consumer price index and retail prices index
For the purposes of LTT:
- the ‘consumer prices index’ means the all item consumer prices index published by the Statistics Board, and
- the ‘retail prices index’ means the United Kingdom General Index of Retail Prices published by the Statistics Board.
LTTA/1110 Meaning of enactment
For the purposes of LTT ‘enactment’ means:
- an Act or a Measure of the National Assembly for Wales
- an Act of Parliament, and
- subordinate legislation made under an Act or a Measure of the National Assembly for Wales or an Act of Parliament
LTTA/1120 Meaning of land
- buildings and structures, and
- land covered by water
LTT can only be charged on “land in Wales”.
Land in Wales does not include land below the low water mark. It does however include jetties, piers and similar structures where one end is attached to land in Wales. It also includes land underwater above the low water mark, for example lakes and rivers.
A caravan, including static caravans and mobile homes, is generally a movable asset. They are generally not considered to be property or land. If the caravan can be moved easily, without damaging the land, it is likely that it would not be subject to LTT.
However, depending on the facts, it may be that LTT would be due in relation to a purchase or lease of the land on which the static caravan sits. If, in buying the static caravan, the taxpayer also enters into a lease of a piece of land, or buys the piece of land, those transactions may be subject to LTT. If the right to use the land for the static caravan is agreed through a licence, it is unlikely that this would be subject to LTT.
These considerations also apply to houseboats. If the boat can be easily removed from its moorings, without damaging the land, it is likely that it would not be subject to LTT. If the boat is permanently attached to the land, potentially through another structure, it may be subject to LTT.
LTT may apply to the mooring agreement, as with static caravans and mobile homes, if the agreement is considered a lease, rather than a licence. If the agreement allows the taxpayer exclusive access to a berth for a term of years, this is likely to be a lease. If the boat can be easily moved to another berth, or if the berth can be accessed without prior notice, this is likely to be a licence.
LTTA/1130 Meaning of registered social landlord
For the purposes of LTT ‘registered social landlord’ means a body registered as a social landlord in a register maintained under section 1(1) of the Housing Act 1996.
LTTA/1140 Meaning of TCMA
‘TCMA’ means the Tax Collection and Management (Wales) Act 2016.
LTTA/1150 Meaning of Wales
‘Wales’ has the meaning given by section 158(1) of the Government of Wales Act 2006.