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Changes announced in the 2016 Budget to SDLT for commercial property

View profile for Colin Winyard
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George Osborne delivered his 8th Budget on 16th March 2016, and has introduced a change to commercial stamp duty land tax (SDLT).

If you are purchasing or taking a lease of a non-residential or mixed use property, you will no longer pay SDLT on the previous “slab” system but will, from 17 March 2016, pay on a “slice” system similar to residential SDLT rates. This is good news if you are purchasing a commercial property up to £1.05 million as you will now in effect pay less SDLT. If you are purchasing above this amount then you will pay more SDLT from 17 March 2016.

The new SDLT rates for non-rent consideration (i.e. purchase price/premium) will be:

Rate Band

Rate

Up to £150,000

0%

From £150,000 to £250,000

2%

above 250,000

5%

For example, if you were to purchase a commercial unit at £280,000 your SDLT would be calculated as; 0% up to £150,000, 2% on the next £100,000 and 3% on the final £30,000 producing a liability for SDLT of £3,500. On the pre-17 March 2016 SDLT rate you would have had to pay £8,400.

The new system in respect of commercial leases has introduced a new 2% rate for a net present value of rent over £5million.  For the vast majority of transactions this will not have an effect as the annual rent would have to be in excess of £380,000 to come close to falling foul of the new 2% rate.

Net Present Value of Rent

Rate

£0 - £150,000

0%

£150,000 to £5 million

1%

Over £5million

2%

These changes to commercial SDLT should be welcomed as the vast majority of lower value transactions will now be benefitting from a reduction in SDLT. It is only the higher value properties/leases that will see an increase in their SDLT liability.

There are some transitionary provisions which may assist you in the following circumstances:

  1. The Transaction is effected under a substantially performed contract;
  2. Tre Transaction is effected under a contract entered into before 17 March 2016 (with certain exceptions).

Warner Goodman has an expert team of commercial property specialists who would be able to guide you through the changes and also ensure that you benefit from any reliefs that may be available.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.