Stamp Duty Land Tax (SDLT)

Stamp Duty Land Tax (SDLT) was introduced by the Finance Act in 2003. It replaced “Stamp Duty” under the previous regime and, unlike Stamp Duty, SDLT is a tax on “transactions” as opposed to a tax on “deeds”. If you are buying, or leasing, a commercial property you will invariably require to deal with SDLT.

SDLT applies to both residential and commercial property purchases but different rules apply to each. In commercial transactions no SDLT is payable on a property purchase transaction valued below £150,000. For transactions valued between £150,001 and £250,000 a rate of 1% of the purchase price is payable. Where the purchase price is between £250,001 and £500,000 a charge of 3% is levied. For purchases over £500,001 or above a 4% rate is charged. If value added tax is payable on top of the price SDLT is charged on that too.

There are certain specified circumstances where relief from SDLT is available including residential properties located in disadvantaged areas, for charities and for intra group company transfers.

If you are purchasing a business then SDLT will only be payable on that part of the price attributable to heritage i.e. the building. SDLT will not be charged on that part of the price attributed to goodwill or moveables.

It is important to remember that SDLT will also be payable on leases. The formula for ascertaining the amount due is complex and to assist the Inland Revenue provide a calculator which works out SDLT due by ascertaining what they term the “net present value”. The net present value is derived by taking into account the rent, duration of the lease and any premium payable. SDLT kicks in for commercial leases only when the net present value exceeds £150,000 (it is only charged on any value in excess of £150,000). The rate of SDLT payable in respect of commercial leases is a straight 1% where there is a net present value of more than £150,000 - there is no sliding scale as with purchases.

SDLT will sometimes be payable on an assignation or renunciation of a lease. It may also occasionally be payable on a rent review but that is the exception rather than the rule – the rental uplift would require to be substantial before a SDLT liability is incurred.

As the buyer/lessee of property the purchaser/lessee is responsible for completing the Land Transaction return and paying the SDLT to Revenue and Customs. In almost all cases we would usually handle that on behalf of any purchaser/lessee as part of their purchase/lease transaction. The Return though is a personal tax document (SDLT is a self-assessed tax) and before we submit that to the Inland Revenue (invariably on line) the purchaser/lessee requires to approve it.

SDLT must be paid before the relevant deed – be it a lease or disposition (title deed) - can be registered; whether in the Land Register or the Books of Council & Session. Failure to submit the SDLT Certificate (the document which is issued in return for the SDLT being paid) will result in the rejection of the deed to be registered.

Returns require to be submitted within 30 days of the “effective date” of the transaction – usually the date of entry. If payment is not submitted timeously then this triggers monetary penalties.

For more information please email Corra Irwin or telephone 01463 239393.

The information in this publication is based on our current understanding of the law. It has been produced for information purposes only. Professional advice should always be sought before taking any action.

Macleod & MacCallum cannot take any responsibility for losses incurred through acting or failing to act on the basis of anything contained in this publication.