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          Budget update - Changes to SDLT for commercial properties

          Date: 16/03/2016

          In addition to the 3% additional SDLT on residential property, tweaks to rule on companies buying residential property and accelerated payment deadlines for payment of property tax, the Chancellor has today announced major changes to stamp duty land tax on commercial property, with effect from midnight (16 March).

          Freehold purchases or premiums

          Commercial SDLT will move from the slab rate method of charging to a slice rate basis, as follows:

          Amount Rate
          Up to £150,000 0%
          From £150,001 to £250,000 2%
          From £250,001


          Rent on leases

          This will continue to apply on a slice basis on the net present value but there are now three bands:

          Amount Rate
          Up to £150,000 0%
          From 150,001 to £5,000,000 1%
          From £5,000,001 2%


          The rules in relation to premium being charged at a minimum of 1% where the rent is over £1,000 (i.e. resulting in no nil rate band on the premium) will no longer apply.  This means that both the net present value and the premium will have the benefit of the nil rate band.

          These changes will apply from midnight tonight, but there are transitional provisions for those properties or leases that have exchanged or substantially performed but not yet completed.  In such cases, the tenant or purchaser can elect that these changes shall not apply to them.  This is done by entering the amount of SDLT payable under the old rates under box 14 of the SDLT return.

          Those contracts that have been exchanged or substantially performed before 17 March 2016 will still be caught, however, if on or after 17 March 2016:

          • there is a variation to the contract, or an assignment of rights on or after 17 March 2016;

          • the transaction is effected in consequence of the exercise of an option, right or pre-emption or something similar; or

          • there is an assignment, sub-sale or other transaction where a person other than the tenant or the purchaser is able to call for a conveyance.

          The SDLT calculators on HMRC’s website are yet to be updated so a manual calculation is required. 

          For help with such calculations and other scenarios, for example, leases that are held over or linked to older transactions, DWF’s Tax Team can assist.

          Author: Deborah Payne

          This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.