STAMP DUTY LAND TAX – COMMERCIAL PROPERTY

In 2003, Stamp Duty Land Tax (SDLT) replaced Stamp Duty in respect of property based transactions.

SDLT is a transaction based tax, not a document based tax, i.e. a tax charge can arise even where there is no document to be stamped, for example SDLT is applicable where an option  agreement is made, which was previously not liable for tax. 

Increased values of commercial property in recent years means that a substantial number of transactions are now subject to payment of SDLT.  The tax is payable on the full purchase price, not just the excess over the relevant threshold, and is also payable on the VAT inclusive price, if VAT is being charged on the purchase price.

SDLT is a complicated form of taxation and you need to seek good quality legal advice to make sure that you are correctly identifying and addressing your obligations.

Here are some reasons why…

SDLT is payable not only on the purchase of a freehold and leasehold of a property but also on the grant of leases, and an SDLT Land Tax Return  must be lodged with HM Revenue and Customs (HMRC) when a lease is granted for a chargeable consideration for 7 years or more and also on a lease for less than 7 years where a chargeable consideration ( on the rent or on any premium) would be chargeable to tax at 1% or higher.

SDLT on leases is payable on what is called the “net present value” of the rent payable under the lease when granted, and a detailed calculation must be made. HMRC provides an on-line calculator to assist.  The SDLT charged, is upon the aggregate of the rent over the whole term of the lease, suitably discounted.

There are strict time limits.  The Land Tax Return must be submitted to HMRC within 30 days of the effective date of the notifiable land transaction. 

It is the tax payer’s personal obligation to provide an accurate assessment of his tax liability.  The Land Tax Return contains detailed information on the parties to the transaction, the property involved and the money to be paid.  HMRC will then issue an SDLT certificate.  It is not possible to register the title to the property at the Land Registry without production of an SDLT certificate.

There are financial penalties for late lodgement of the Land Tax Return and for late payment of the tax.  It should be noted that a criminal offence is committed if the return is completed for the purposes of fraudulently evading payment of the tax.  You should obtain professional advice on the completion of the Land Tax Return.

Young & Lee’s property team have the skills to help you if you are handling transactions involving land and property.  Feel free to speak to the team as soon as possible,  they will be pleased to help you through this increasingly complex area of law.

SDLT rates applicable to the purchase of commercial property (current as at 1^st July 2009)

·         Up to and including £150,000 is nil

·         £150,001 - £250,000 is 1%

·         £250,001 - £500,000 is 3%

·         over £500,000 is 4%