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The tinkering has now spread to commercial property – however, this is broadly limited to the replacement of the slab system with a progressive one (and a corresponding change to the rates).
However, one should also note that those who are purchasing high value commercial property will pay more – and potentially seriously more – SDLT.
The changes will affect the purchases of freehold property, the assignment of an existing lease and for the upfront payment (premium) on a new leasehold transaction,
On and after 17 March 2016, rather than paying a flat percentage on the chargeable consideration, SDLT will be charged on a progressive basis to the extent that it falls in to one or more bands.
The new rates and thresholds for freehold purchases and leases premiums are as follows:
|Transaction Value Band||Rate|
|£0 – £150,000||0%|
|£150,001 – £250,000||2%|
The eagle eyed will note that the new 5% top rate is 1% higher than the current rate. As such, those high value commercial property transactions will suffer a higher level of SDLT.
For new leasehold transactions, SDLT is already charged at each rate on the portion of the net present value (NPV) of the rent which falls within each band. On and after 17 March 2016 a new 2% rate for rent paid under a non-residential lease will be introduced where the NPV of the rent is above £5 million.
The new rates bands and thresholds for rent paid under a lease are:
|Net present value of rent||Rate|
|£0 – £150,000||0%|
|£150,001 – £5,000,000||1%|
Reform of the rather archaic slab system is welcomed. However, it is clear that large commercial property transactions could suffer substantially greater levels of SDLT as a result.
Sadly, it represents the Chancellor’s eagerness to generate tax from the ‘sitting duck’ that property represents. This is perhaps the thin end of the wedge for commercial property which has largely avoided the revenue raising measures imposed on residential property
If you or your clients are in the process of purchasing commercial property and may be effected by these changes then please do not hesitate to get in touch.