Stamp Duty Land Tax on Commercial Property
Stamp duty land tax (SDLT) must be paid on non-residential property in England. This includes freehold and leasehold commercial properties. However, the rules vary for leasehold properties depending on whether it is a new or an assigned lease.
It is worth noting that this information is only applicable in England. In Wales, stamp duty land tax was replaced by the land transaction tax in April 2018.
Stamp duty land tax rates for freehold commercial property
As of 17 March 2016, SDLT on non-residential property in England is based on a banding system. As it currently stands, you will be charged 0% on the first £150,000 of the purchase price. So, if the property is bought for £150,000 or less, you will not incur any stamp duty.
You will then be charged 2% on the next £100,000. In other words, the portion of the purchase price from £150,001 to £250,000 is subject to a 2% rate. This means that if you buy a commercial property for £250,000, you will pay £2,000 SDLT.
After that, you will be charged 5% on the remaining amount. In other words, the portion of the purchase price that is above £250,000 is subject to a 5% rate. This means that if you buy a commercial property for £275,000, you will pay £3,250 SDLT in total.
Stamp duty land tax rates for leasehold commercial property
If you buy a commercial property with an existing or ‘assigned’ lease, you will pay SDLT on the purchase price of the lease. This is calculated according to the same band system used for freehold commercial property. This means you will be charged:
- 0% on the first £150,000
- 2% on the portion from £150,001 to £250,000
- 5% on the portion above $250,000
However, if you buy a commercial property with a new non-residential lease, you will also pay SDLT on your rent. This is known as the ‘net present value’. This is paid in addition to the SDLT on the purchase price of the lease.
The amount of SDLT that must be paid for the net present value is calculated according to the total amount of rent payable over the life of the lease. If this figure is under £150,000, there will be no additional SDLT to pay. Above £150,000, you will be charged:
- 2% on the portion between £150,001 to £5,000,000
- 5% on the portion above £5,000,000
Paying stamp duty land tax on commercial property
If you purchase a commercial property, a stamp duty land tax form must be sent to HMRC within 14 days of completion. A failure to do so will result in a penalty. Even if SDLT is not payable, you are still obliged to complete and submit a SDLT form.
Commercial property solicitors
If you are buying a commercial property, you must take the stamp duty land tax into account before committing to the transaction. The added cost can be significant, especially if you are buying a new leasehold.
Additionally, if you are buying more than one commercial property, HMRC may decide that SDLT should be calculated according to the combined value of the properties, rather than calculated separately.
Our commercial property solicitors can discuss the intricacies on stamp duty land tax with you, making you are aware of the potential liability. We can also explore whether you may be exempt from paying SDLT, and whether there are any reliefs available.
If you proceed with the commercial property transaction, we can handle the process on your behalf, ensuring full compliance in respect of your tax obligations.
Make an enquiry
If you would like to speak to a legal expert about a commercial property transaction, please call our Sunderland solicitors on 0191 567 7244 and we’ll be happy to help you.
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