Changes in SDLT rates for Commercial Property from 17 March 2016

March 2016 Budget Update

Budget 2016 SDLT slab rates increase for commerical property in England & Wales

It was announced during the 2016 Budget by the Chancellor of the Exchequer, George Osborne, that SDLT ‘slab rates’ would be abolished for commercial property in England and Wales at midnight on 16 March 2016. This follows the reforms in December 2014 for residential property which introduced ‘progressive SDLT rates’.

The new rates will affect any commercial properties exchanged on or after 17 March 2016 and will be charged on the portion of the purchase price which falls within each rate band.  The new SDLT rates and thresholds for freehold purchases and lease premiums are:

Transaction Value Band         

SDLT   Rate

£0 - £150,000                                

0%

£150,001 - £250,000                      

2%

£250,000 +                                  

5%

Under the new system, where the consideration exceeds the threshold, only the excess will be subject to the higher rate of SDLT – so for example if a property is sold for £160,000 only £10,000 of the consideration will be subject to the 2% rate of SDLT. Under the previous ‘slab’ system the entire consideration would have been taxable at 2%.

In addition, on and after 17 March 2016 a new 2% rate for a non-residential lease will apply where the net present value (NPV) of the rent is £5 million or more. The new SDLT rates and thresholds for rent paid under a lease are:

NPV of Rent                            

SDLT Rate

£0 - £150,000                                

0%

£150,001 - £5,000,000                  

1%

£5,000,000 +                                

2%

Although many commercial property purchases will see a reduction in SDLT charged, it should be noted that the Treasury expects to receive more than £500 million of additional revenue per annum from this measure.

If you require advice on this or with any commercial property purchase and sale please contact :

Anna Spriggs, Partner, Head of Commercial and Commercial Property Team

on 01733 882800 or email mailto:anna.spriggs@hcsolicitors.co.uk

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This article has been prepared for general interest and information purposes only; it does not constitute legal advice and should not be relied on as such. While all possible care has been taken in the preparation of this article, no responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by the firm or the authors.