The following article is an update to the information below: http://www.lawplainandsimple.com/legal-guides/article/stamp-duty-land-tax-commercial-a-bolt-from-the-blue
From 1 April 2016, anyone buying residential property in addition to their main home is now subject to a 3% increase on the Stamp Duty Land Tax (SDLT) that would currently be payable on the transaction. SDLT is therefore high on the agenda for buy-to-let landlords and those seeking to buy second homes.
However, these changes do not affect transactions involving commercial property.
For commercial land/property, the applicable rates of SDLT for freehold and leasehold purchase transactions are currently:
0% - Up to £150,000 - freehold or leasehold premium with annual rent under £1,000
1% - Up to £150,000 - leasehold premium with annual rent of £1,000 or more
1% - £150,001 to £250,000
3% - £250,001 to £500,000
4% - Over £500,000
On the grant of a lease, SDLT is payable on the value of the rent over the lifetime of the lease (the Net Present Value) and is charged as follows:-
0% - Up to £150,000
1% - the portion over £150,000
A land transaction return must be submitted to HMRC within 30 days of the effective date of the transaction (usually completion). Failure to do so attracts the following penalties:
- Three months late: £100.
- Three to 12 months late: £200.
- Over 12 months late: £200 plus an amount equal to the unpaid SDLT.
If a submitted return is incorrect, penalties are based on the amount of tax understated; the nature of the behaviour and the extent of disclosure by the taxpayer. There will be no penalty where a taxpayer makes a mistake, but there will be a penalty of up to:
- 30% for failure to take reasonable care;
- 70% for a deliberate understatement;
- 100% for a deliberate understatement which has been concealed.
It is therefore essential that your legal advisers are made aware of all of the circumstances surrounding a commercial property transaction in a timely fashion, and that your accountant is involved at an early stage in order to assess the global tax implications and avoid costly penalties.
Author: Emma Thompson
DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. This article is merely a general comment on the relevant topic. If specific advice is required in connection with any of the matters covered in this article, please speak to WSP Solicitors directly.
Published on 4th April 2016
(Last updated 28th March 2018)