27th April 2016
Following the latest budget on the 17 March 2016 the SDLT calculation for Commercial Property has changed and has been brought into line with the way Residential SDLT has been calculated since midnight on 4 December 2014.
Previously SDLT on Commercial Property was calculated on a “slab” basis – the SDLT payable on the consideration was calculated by applying the percentage applicable to that band, and therefore a single rate of tax, to the entire amount. Now, the SDLT is calculated as a “slice” – the SDLT is calculated to apply different rates of tax depending on how much the consideration falls into each SDLT band.
As an example, if an individual purchased a freehold commercial property for £300,000 the SDLT payable under the old slab system would have been £9,000 (3% of £300,000). Under the new slice system the SDLT payable is £4,500 (0% on all consideration up to £150,000, 2% on consideration paid between £150,000 and up to £250,000 and 5% on consideration paid above £25,000).
Commercial properties purchased for up to £1,050,000 will incur the same or reduced SDLT under the new slice calculation. Commercial properties purchased for more than £1,050,000 will incur higher SDLT.
SDLT: Leasehold rents
SDLT is also payable on rent due under commercials leasehold transactions calculated by reference to the net present value (NPV). Following the budget on 17 March 2016 a new band of 2% was introduced to the extent that any portion of the NPV is above £5,000,000.00
SDLT: the £1,000 Rule
Prior to the budget on 17 March 2016 where the relevant rent on a lease was over £1,000 the purchaser was unable to benefit from the 0% threshold on any premium paid for the grant of the lease.
From the 17 March 2016 if the relevant rent is £1,000 or more the purchasers will be able to benefit from the 0% threshold for both the premium and rental elements of a leasehold transaction.
HMRC have a SDLT calculator to assist with the calculation of SDLT.
Article provided by Emily Minett, Trainee Solicitor currently in the Commercial Property team at Mundays.
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