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SDLT – Stamp Duty Land Tax on Commercial Property Guide

What is SDLT?

SDLT, which stands for Stamp Duty Land Tax is charged on all types of property and land transactions in the UK including commercial properties.

SDLT is payable on all property transaction types, both purchases and leases, and this now includes first-time buyers.

Stamp duty land tax on commercial property purchases

Calculating SDLT on commercial property sales

The amount of SDLT you pay will depend on the commercial property purchase price. As the table below shows, you will not be required to pay SDLT if you are buying a commercial property with a purchase price lower than £150,000, although in most cases you will still be required to complete and send an SDLT form.

The remaining amount over £250,0005%

Transaction amount SDLT rate
Lower than £150,000 0%
Between £150,001 and £250,000 2%

Example:

To calculate the SDLT amount for a commercial property with the purchase price of £300,000:

  • First £150,000 at 0%: £150,000 x 0% = £0
  • Next £100,000 at 2%: £100,000 x 2% = £2,000
  • Remaining £50,000 at 5%: £50,000 x 5% = £2,500

Total SDLT payable: £0 + £2,000 + £2,500 = £4,500

Importance of SDLT for commercial property purchase

It is certainly worth taking the commercial SDLT amount when choosing which property to buy, as a small difference in the transaction value can have a significant impact on the SDLT rate.

For instance, as a result of choosing a property valued at £300,000 over another one with a value of £250,000, you would be paying additional SDLT of £2,500 for the £50,000 difference in property value between these two properties.

Stamp duty land tax on non-residential property rental/leases

Calculating SDLT for leasehold commercial properties

SDLT is also payable on commercial property leases in the UK where above certain thresholds. When leasing a commercial property, the SDLT amount is calculated based on the net present value (NPV).

Please see below the table that shows the SDLT rate.

The remaining amount over £5,000,0002%

NPV SDLT rate
Lower than £150,000 0%
Between £150,001 and £5,000,000 1%

Example:

To calculate the SDLT amount for a non-residential property with the net present value of £7,000,000:

  • First £150,000 at 0%: £150,000 x 0% = £0
  • Next £4,850,000 at 1%: £4,850,000 x 1% = £48,500
  • Remaining £2,000,000 at 2%: £50,000 x 5% = £40,000

Total SDLT payable: £0 + £48,500 + £40,000 = £88,500

As with sales transactions, SDLT plays an important role when it comes to choosing similar properties with the small price difference, as this can potentially have a large difference in the SDLT amount you will need to pay.

Exemptions

As well as where the transactions are categorised under the 0% rate bands, there are a few circumstances when SDLT exemptions apply.

If you are granted a commercial property lease of more than seven years, while the premium is under £40,000 with the annual rent of less than £1,000, you will not be required to pay SDLT.

You will be exempted from paying SDLT for any commercial property purchases of less than £40,000. Furthermore, SDLT will not be payable for a property left in a will including those with outstanding debt.

SDLT reliefs

There are a number of SDLT reliefs that can reduce the SDLT rate significantly including:

  • Transfer of property between companies
  • Charities Relief

SDLT deadlines and penalties

You need to ensure your SDLT return is submitted and paid within 30 days of the commercial property transaction completion. Failing to pay the required amount within the required time frame can result in SDLT penalties.

The penalty payment you will have to pay depends on the late payment duration. Please see the table below

More than 24 months30% of the SDLT amount

Late SDLT payment by Penalty fine amount
Up to 12 months 10% of the SDLT amount (maximum of £300 penalty)
Between 12 months and 24 months 20% of the SDLT amount

SDLT manual

Stamp duty land tax manual is available on the Government website here.

Filling the return form

There are a few different ways you can file your SDLT returns.

  • Via HMRC (HM Revenue and Customs) Stamp Duty Land Tax Online Service here.
  • By filling in and sending your SDLT paper return to HMRC

Stamp duty land tax in Scotland – LBTT

SDLT is no longer applicable in Scotland. You are required to pay Land and Buildings Transaction Tax (LBTT) when you purchase or lease a commercial property in Scotland. As with SDLT, LBTT has banding system.

LBTT on commercial property purchases in Scotland (After January 2019)

The remaining amount over £250,0005%

Purchase amount LBTT rate
Lower than £150,000 0%
Between £150,001 and £250,000 1%

LBTT on commercial leases in Scotland

NPV of rent LBTT rate
Lower than £150,000 0%
The remaining amount over £150,000 1%

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