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Stamp Duty & Company Purchases – The Facts

Author

Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

Stamp Duty Company Purchase – The FAQs & Facts

General – Envelope Dwellings & Super Rates of SDLT

In 2012, two measures were introduced to curtail the corporate enveloping of residential property.

The first being a 15%  ‘super rate’ of SDLT where a dwelling was being transferred to a Company (or other non-natural person).

The other was the Annual Tax on Enveloped Dwellings (“ATED”) rules which apply an annual charge where the relevant conditions are satisfied.

The 15% rate

The 15% rate applies to a purchase of a residential property by a Company where the consideration exceeds £500k – unless one of the reliefs set out below applies.

Company purchase – stamp duty rates and thresholds

 From 1 April 2016, a 3% surcharge applies to the purchase of additional dwelling by an individual. IN addition, this 3% surcharge also applies to any purchase by a Company.

However, if the 15% rate applies then there is no 3% surcharge.

 The bands and rates can therefore be summarised as follows:

 

ConsiderationRate
£0 – 40k0%
£0 -125k3%
£125k – 250k5%
£250k – 500k8%
£500k  – 925k15%
£925k – 1.5m15%
£1,5m +15%

 

Relief

As stated above, a Company is subject to the 15% stamp duty rate where the consideration is more than £500,000 unless a relief applies.

Relief is available where the property is used for a qualifying purpose.

Examples of a ‘qualifying purpose’ are as follows;

  • Used in a property rental business
  • Used by a property developers or trader
  • acquiring by a financial institution in the course of lending
  • the property is occupied by an employee or employees
  • farmhouses

Interaction with ATED

Generally speaking, where ATED applies to a property then the 15% rate of SDLT will also apply and vice versa.

Conclusion

This measure was introduced with ATED to curtail the use of companies to hold properties that would be used by the ultimate beneficial owner as a dwelling. As such, where a company buys a property for a commercial purpose then neither is likely to apply.

 

If you have any queries around stamp duty company purchase, or stamp duty generally, then please get in touch

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