News & Insights

Stamp Duty Land Tax reforms for Non-Residential Transactions

At budget on 16 March 2016, the Chancellor of the Exchequer announced a change to the way stamp duty land tax (‘SDLT’) is calculated for non-residential property transactions which complete on or after 17 March 2016.

Non-residential transactions include transactions where there is a mixture of non-residential and residential property. The reform does not affect purchases of residential property.

On or after 17 March 2016:

  • The SDLT rate for non-residential freehold and leasehold transactions will only be payable on the portion of the consideration which falls within each SDLT band (rather than tax being due at one rate on the entire value).
  • SDLT on the rental element of the non-residential leasehold transactions is already taxable on the portion of the consideration that falls within each band.

From 17 March 2016, a new 2% rate will be introduced for transactions with a net present value (NPV) above £5 million.

  • From 17 March 2016 if the relevant rent (not the NPV) is £1,000 or more, purchasers will be able to benefit from the 0% threshold for both the premium and rental elements of a leasehold transaction.

Subject to transitional rules, the following rates of SDLT will apply to freehold transactions, lease premiums and lease assignments that complete on or after 17 March 2016:

Chargeable Consideration                                        Rate

  • Up to £150,000:                                                  0%
  • Over £150,000 and up to £250,000:           2%
  • Over £250,000:                                                   5%

Where contracts for the purchase of a property where exchanged before 17 March 2016 but the contract completed on or after that date, purchasers can choose not to apply the new rules and so pay SDLT under the old rules. There are exclusions to this rule.

From 17 March 2016, a new 2% rate for rent paid under a lease with a NPV of above £5 million will apply. The new rates are as follows:

NPV of Rent                                                                      Rate

  • Up to £150,000:                                                   0%
  • Over £150,000 and up to £5,000,000:        1%
  • Over £5,000,000:                                                2%.

Please contact our Commercial Property team for further information.