Stamp Duty Land Tax on commercial properties
Key points:
- Most transactions involving commercial property will see tax payers paying less SDLT.
George Osbourne announced a huge change in the Stamp Duty Land Tax (“SDLT”) rates on commercial properties (and mixed use).
Historically SDLT has been charged on a slab basis, i.e. you pay at a fixed percentage depending on the purchase price. From 17 March 2016 commercial property will fall under a similar regime to residential property, whereby you pay at the portion of purchase price which falls between each band. The new rates mean that if your property is £1.05m or less you are better off, however if it costs more you will pay more SDLT.
£0 - £150,000 0%
£150,001 - £250,000 2%
£250,000 + 5%
There will also be a new 2% rate for rent paid under non residential leases where the NPV is over £5 million.
This is a much simpler way to run matters as it helps eliminate the distortions created by the previous system.
Response to SDLT second properties consultation
The government has also released it’s response to the consultation on the new 3% rate for second properties, although the legislation hasn’t been released they have confirmed that the new higher rates will apply to purchases of additional residential properties on and after 1 April 2016. The government announced the following changes from the policy design originally proposed:
To help those moving in difficult circumstances, purchasers will have 36 months rather than 18 months to claim a refund of the higher rates if you buy a new main residence before disposing of your previous main residence. The refund can be claimed once the previous main residence has been disposed of.
Purchasers will also have 36 months between selling a main residence and replacing it with another without having to pay the higher rates.
The 36 month period will commence from 25 November 2015 for purchasers who disposed of their previous main residence prior to Autumn Statement.
The government has decided to apply the higher rates equally to all purchasers without an exemption for significant investors.
When applying the higher rates, a small share (50% or less) in a property which has been inherited within the 36 months prior to a transaction will not be considered as an additional property.
The government will consider married couples who are separated and living in circumstances that are likely to become permanent, as divorced for the purposes of applying the higher rates.
