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Commercial Stamp Duty Land Tax (SDLT)

Are you buying commercial property or taking a lease of commercial property? Have you considered what your stamp duty land tax position will be?

Are you buying commercial property or taking a lease of commercial property? Have you considered what your stamp duty land tax position will be?

Stamp duty land tax is a tax charged by the government directly on property transactions.  SDLT is a tax on any “acquisition” of a “chargeable interest” in land other than an “exempt transaction”. A transaction may be notifiable even if no documents exist. An acquisition includes:

  • a purchase of commercial property;
  • the grant of a commercial lease; and
  • the surrender or release of a chargeable interest.

The purchaser must, in the case of every notifiable transaction, deliver an SDLT return to HMRC and pay any SDLT due within 14 days of the effective date of the transaction (which is usually the date of completion).

Chargeable consideration for the purposes of SDLT

The chargeable consideration given for a transaction sets the amount that will be subject to SDLT. It includes any consideration in money or money’s worth given directly or indirectly by the purchaser or by a person connected with the purchaser. This can be as straightforward as the money paid by a buyer to a seller in order to purchase a property. However, chargeable consideration can also include:

  • the net present value (NPV) of a lease (see below);
  • the provision of services – the value of which is deemed to be the amount that would have to be paid in the open market to obtain those services;
  • payment of the seller’s costs – although there is an exemption in the case of the grant of a lease; and even
  • consideration in kind – taken to be its market value at the effective date.

And any VAT that is due on any form of chargeable consideration is also included as chargeable consideration for SDLT purposes!

In certain circumstances, the chargeable consideration for a transaction will not be the consideration that has changed hands at all but the market value of the interest acquired instead. This usually applies in relation

For more information on Commercial Stamp Duty Land Tax (SDLT)...

Please do not hesitate to contact an Everyman Legal Solicitor on 0845 868 0960 for a FREE discussion or email geoffrey.cotterill@everymanlegal.com

SDLT rates applicable to non-residential or mixed use property

Since 17 March 2016, SDLT for commercial property is charged on the following basis:

1. SDLT on the purchase price of commercial property or mixed use property

SDLT is not charged at one rate on the whole of the purchase price but is charged on a “slice” basis, like income tax. This means that the amount of consideration falling within a particular band is taxed at the rate applicable to that band.

The SDLT rates applicable to non-rent consideration in relation to commercial property or mixed use property (such as a purchase price and including any VAT if applicable) are:

Non-rent consideration Rate for transactions on or after 17 March 2016
Not more than £150,000 0% (“nil rate band”)
More than £150,000, but not more than £250,000 2%
More than £250,000 5%

 

2. SDLT on the rent for commercial property or mixed use property

Where there is rent involved, such as under a lease, the position is more complicated.  SDLT is charged on any lease premium paid (i.e. a one-off purchase price for the lease) in accordance with the above. However, SDLT is also charged on the net present value (NPV) of the rent over the term of the lease.

 

The NPV is the value of the rents that will be paid throughout the term of the lease discounted to reflect the fact that rents to be received in the future have a lower value than rents received today.  SDLT is charged on that total NPV at the following rates on a slice basis:

NPV Rate
£0 to £150,000 0%
Over £150,000 but not more than £5 million 1%
Over £5 million 2%

 

The HMRC website has a useful SDLT calculator which will calculate SDLT amounts and NPV’s on your behalf. This can be accessed here

Land transactions that do not require an SDLT return

Only the following land transactions do not require an SDLT return to be made:

  • non-lease acquisitions where the chargeable consideration (including linked transactions) is less than £40,000;
  • the grant of a lease for a term of seven years or more where:
    • the chargeable consideration (other than rent) is less than £40,000; and
    • the annual rent is less than £1,000;
  • the assignment or surrender of a lease where:
    • the lease was originally granted for a term of seven years or more; and
    • the chargeable consideration for the assignment or surrender is less than £40,000;
  • the grant, assignment or surrender of a lease for a term of less than seven years where the chargeable consideration does not exceed the zero-rate threshold.

Therefore, you may have to submit an SDLT return to HMRC even if no SDLT is payable. A fine for late submission, even where there is no tax due, can be levied against you if you do not.

The rules on SDLT in relation to commercial property have become more and more complex over time. There are numerous exception and quirks to the general rules which means that if you’re doing anything other than buying a commercial property from someone you don’t know, or taking a lease of commercial property from someone you don’t know, you should consider taking legal advice on the SDLT implications of your proposed transaction early enough to budget for any unexpected costs.

Our dedicated team of solicitors, based in Witney, Oxfordshire, would be happy to answer your questions about Employee Share Schemes.

If you would like to talk to one of our team please call us on 0845 868 0960 or email geoffrey.cotterill@everymanlegal.com.

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