SDLT is payable on the purchase of land and buildings in England and Northern Ireland. There are different rates payable dependent upon whether the property is residential or commercial. This article just looks at the position for commercial land and buildings. Most people are aware that SDLT is due when a commercial freehold property or commercial freehold land is acquired but many people are surprised to learn that SDLT is also payable when a lease is granted or assigned.

The amount of SDLT payable is assessed on the “consideration” for the transaction. This is usually the price you pay for the property or land (although it may sometimes include another type of payment eg goods, release from a debt or transfer of debt) but in the case of a leasehold acquisition, the consideration is any lease premium AND the value of the total annual rent you pay over the life of the lease (the “net present value”). The tax due is calculated on each of these separately and then added together.

The SDLT rate for a lease premium is based on the following rates:

The SDLT rate for the NPV is based on the following rates:

It is worth nothing that SDLT is calculated on the VAT inclusive consideration i.e. if VAT is payable on the annual rent then the VAT inclusive figure will be used to calculate the SDLT due – a tax on a tax!

There are certain higher rates of SDLT for multiple purchases or transfers from the same seller and there are also various reliefs from SDLT so it is sensible to seek advice on this. Moorcrofts Commercial Property Team can calculate the SDLT due for you, before you agree terms to take a new lease and we will prepare and submit the SDLT return to HMRC on your behalf following completion of the lease.

For more information please contact Julia Ferguson.