Stamp Duty Land Tax on Commercial Property

What is SDLT? (Stamp Duty Land Tax)

SDLT (also known as Stamp Duty Land Tax, and sometimes just Stamp Duty) is a tax payable on both commercial and residential property transactions in England and Northern Ireland – so whether you take a lease of an industrial unit for business purposes or downsize your family home you will pay the same type of tax, albeit at different rates.  The person acquiring the interest is liable for the tax.

Note that SDLT is not payable in Scotland and Wales, but equivalent taxes operate in these areas.

When do you have to pay SDLT?

From 1 March 2019 you will only have 14 days to submit an SDLT return to HMRC and pay the SDLT due, otherwise, you will be charged penalties and interest. The clock usually starts ticking from the day of completion of the sale, the grant of the lease or the renewal of an existing lease, unless you take occupation of the property sooner.

What counts as commercial property?

For SDLT purposes commercial property is defined as “any property that is not residential”. This includes university halls of residence, care homes, hospitals and prisons. It also includes the purchase of any six (or more) dwellings in one go.

How much is SDLT on commercial property?

All freehold commercial property purchases and transfers for consideration of over £150,000 will attract SDLT.  The amount payable will depend on the value of the transaction. If VAT is paid on top of the purchase price it should be included.

• No SDLT is payable on the first £150,000
• SDLT of 2% is payable on the next £100,000 (from £150,001 to £250,000)
• SDLT of 5% is payable on consideration above £250,000

You will still need to submit an SDLT return even if no SDLT is payable unless the purchase price is less than £40,000.

How much is SDLT on commercial leases?

SDLT is payable on the grant or purchase of most leases and leasehold interests, but you will need to do a calculation to find the figure that determines at what rate. This is known as the Net Present Value and takes into account the rent and any premium paid and the length of the lease. The following rates apply:

• No SDLT is payable on the first £150,000
• SDLT of 1% is payable from £150,001 to £5,000,000
• SDLT off 2% is payable above £5,000,000

The easiest way to calculate the amount due is to use the calculator.

No SDLT return needs to be submitted on the grant of leases of 7 years or more with a premium of less than £40,000 and the rent is less than £1,000 a year, or the purchase of a lease with less than 7 years left to run and the premium is less than £40,000.  

SDLT is not payable on the grant of a licence to occupy or a tenancy at will.

In some cases, reliefs may be available to reduce or remove the need to pay SDLT in its entirety but we would suggest taking advice before deciding whether or not they apply. Our commercial property team deal with SDLT on all types of property transactions and will be able to assist you by preparing and submitting your return.  Please contact us on 0161 941 4000 or email us on lawyers@myerson.co.uk.