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Stamp Duty Land Tax on Commercial Properties – what this means for you

What is Stamp Duty Land Tax (SDLT)?

If you’ve not bought a property before, the phrase ‘Stamp Duty’ might leave you scratching your head and heading to your local post office for a book of twelve first-classes. However, in England and Northern Ireland, you’re liable to pay Stamp Duty when purchasing a residential property or piece of land that costs more than £125,000 or more than £40,000 for second homes. Stamp Duty is a government regulation that must be paid by the official moving-in date or possession date of your new home. It was first introduced in England in 1694 as a transaction tax to raise money for the war against France and was raised on goods such as hats, newspapers and patent medicines. Stamp Duty is not only payable on residential but also on commercial properties and leases.

Commercial property falls into two distinct categories:

  • Non-residential properties – including offices, agricultural land and any other property that is not used a residence. You may also elect to pay the commercial rates if you are purchasing six or more residential properties in a single transaction.
  • Mixed-use properties – combining both residential and non-residential elements such as a shop with a flat upstairs.

What you need to know

The Stamp Duty rate you must pay varies depending on the purchase price or lease premium for purchased properties, or the net present value of rent of the property if leasing. It must be noted that if you are paying VAT on either a purchase or on rent, the SDLT calculation must also include the VAT element.

We understand that this can be slightly confusing which is why we’ve broken it down as simply as possible for you.

Purchased Properties or Lease Premium:

  • 0% on the first £150,000
  • 2% on the next £100,000
  • 5% on the remaining amount (above £250,000)

Net Present Value of Rent (defined by HMRC as ‘the total rent over the life of the lease’):

  • 0% on the first £150,000
  • 1% on the next £150,000
  • 2% on the remaining amount (above £5,000)

If you are looking to purchase or take a lease of property in Wales or Scotland, please note that the rates are operated differently.

Deadlines and penalties

From the 1st March 2019, the deadline to file an SDLT Return and pay SDLT was reduced to 14-days after the ‘effective date’; typically the date the transaction completes, or the date the contract is substantially performed if before completion.

If you fail to file a return within the 14-day deadline, you will receive a fixed penalty of:

  • £100 if returns submitted within three months of the 14-day deadline; or
  • £200 if submitted more than three months of the 14-day deadline.

Please note that failure to file a return within 12-months may also result in a tax-based penalty, which may result in your liability doubling. If you fail to pay SDLT, interest will start to accrue until payment is made.

Next steps

We understand that Stamp Duty can be  complex, especially with the variations on property types and costs, which is why our experienced Commercial Property Lawyers are on-hand to help make the process easier with a highly experienced and knowledgeable base.

If you are in the process of purchasing a property or require assistance in any other areas of commercial property, please contact Linder Myers today on 0800 042 0700 or enquiries@lindermyers.co.uk

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