What stamp duty will I pay on a commercial property?
4 January 2019 by Ellen Petersen
The payment of Stamp Duty Land Tax (SDLT) is not limited to house buying. It is also payable to HM Revenue and Customs (HMRC) on purchases of commercial property and on leases of certain values (such value being calculated with reference to the amount of rent payable over the contractual term of a lease – known as the “net present value” or NPV). You don’t pay SDLT on the lease rent if the NPV is less than £150,000 and you won’t need to pay SDLT on the acquisition of commercial property if the purchase price is less than £150,000.
Conversely, however, SDLT applies when you buy or enter into a new commercial (also called “non-residential”) or mixed-use lease. In this instance, you pay SDLT on both the:
• purchase price of the lease (known as the “premium”) and
• value of the annual rent over the lifetime of the lease (the NPV)
These are calculated separately then added together, with SDLT payable over the £150,000 threshold. However, if you buy (also known as taking an assignment of) an existing lease, you only pay SDLT on the lease price. This is because the first tenant under that lease would have paid SDLT when it was granted.
You should also be aware that if VAT is payable in addition to the purchase price, or the lease rent, then the SDLT is payable on the whole amount plus the VAT. This is effectively a tax payable on tax! The commercial SDLT pages on the gov.uk website include a link to the HMRC calculator, which provides a helpful and user-friendly guide.
Your legal advisor will provide you with guidance as to the amount of SDLT payable under a given transaction and will usually organise the submission of the SDLT return and payment of the SDLT to HMRC in good time. The Finance Bill 2019 reduced the timeframe in which to pay SDLT from 30 days to 14 days – effective from 1 March 2019. Payments made outside this timeframe are liable to interest and late payment penalties.
Please also remember that some transactions may attract an SDLT relief or exemption, where the amount of SDLT payable can be reduced or indeed not be payable at all. Having said that, if you are entering into a deal which is linked to another, for SDLT purposes, the amount payable may be higher than you expect. Please do speak to the commercial property team here at Fisher Jones Greenwood for more information about your own circumstances, call 01206 700113 or email [email protected]