What’s the rate of SDLT on student accommodation?
21st February 2025
Posted in Articles, Stamp Duty, Stamp Duty Land Tax by Andrew Marr
The rules about stamp duty land tax (SDLT) payable in respect of student accommodation are not very clear and are the cause of much confusion. Some student accommodation is subject to non-residential SDLT rates, some is subject to residential rates without the 5% surcharge applying and some is subject to residential rates without restriction.
Rules on student accommodation
There are two lists for ‘institutional accommodation’ made up of ‘List A’ and ‘List B’. Broadly, ‘List A’ is treated as being residential for SDLT purposes and ‘List B’ is treated as being non-residential.
In ‘List A’ we are told in (b) that a building used at the effective date (usually completion) as ‘residential accommodation for students’ should be treated as residential but this comes with the caveat that this only applies if the accommodation does not fall within (b) in ‘List B’. ‘List B’ (b) refers to ‘a hall of residence for students in further or higher education’.
It should be fairly clear when a student hall of residence is involved. HMRC consider that these need to be ‘owned and managed by the educational establishment itself’ and ‘be limited to students of that establishment’. What is not particularly clear is what constitutes the other ‘normal’ student accommodation in ‘List A’. This is still important because even ‘List A’ property will not be subject to the 5% SDLT surcharge which is applicable to most purchases of residential investment property by individuals (if they own other residential property) and purchases by companies.
What is ‘normal’ student accommodation?
Generally, a buyer will want to demonstrate that a property is student accommodation if they would otherwise be liable to the 5% SDLT surcharge. The first point to note is that this argument would be ‘off the table’ if the property is not being let to students at the point of acquisition (save for a possible short-term lull between leases). It is clear that a property needs to be ‘in use’ as student accommodation for the exemption from the surcharge to apply.
Unsurprisingly, HMRC seek to apply their own further restrictive interpretations on what should meet the criteria of student accommodation. They say that “residential accommodation for students other than student halls of residence, such as the type of properties owned by companies that specialise in the provision of student accommodation, are, while aimed at the student market, not owned by, or involved with, the educational establishments that the students in these buildings attend. There will still be an obligation for all residents to be students, which would be expected to be able to be evidenced through a restriction in the permitted planning use. These properties are subject to the residential rates of SDLT, but not [the surcharge]”.
Therefore, HMRC are saying that there needs to be some kind of rule that restricts the use of the property to student use. It follows that they do not believe that properties which just tend to be let out to students should benefit from the surcharge exemption. On one level this seems reasonable, but it is possible that they are creating a strictness which was not intended by the legislation. I think that if a buyer acquires a property which is let to students (on an existing lease) and is habitually used as student accommodation then there should at least be an argument that the surcharge does not apply. Surely if the intention was to restrict the definition of student property in the way that HMRC argues then the legislation would have made this clear. Unfortunately, this is not a point that has gone to tribunal.
Forbes Dawson view
Purchasers of ‘student accommodation’ should think carefully about whether it can meet this definition of such accommodation for SDLT purposes. Although HMRC’s SDLT guidance is restrictive, ultimately the position should depend on whether the accommodation can sensibly be construed as ‘residential accommodation for students’. If there are restrictions on who can rent the property out (such as planning restrictions) then the position should be clear. If the property is factually let out to students and is (for example) managed by a student property agency then the position will be less clear but could be arguable. I can see that long term agreements with student letting organisations may make the position here more robust from HMRC attack. One problem is that many buyers do not know about the issues with student accommodation in the first place and so blindly pay the surcharge without taking any further advice.
