Rogers & Norton News

Chancellor announces reform of non-residential Stamp Duty Land Tax rates in 2016 budget

Thursday, March 17, 2016

Calculations will change for freehold and leasehold non-residential transactions with effect from today (17th March 2016), so that the Stamp Duty Land Tax rates apply to the portion of the purchase price within each of the three new rate bands.

SDLT calculations for residential transactions are currently based on this method, and the changes will bring non-residential transactions more in line with them in that SDLT charges for both residential and non-residential transactions will be based on the portions of the purchase price falling into the rate bands. 

Previously, for freehold purchases, for the assignment of an existing lease and for the premium on a new leasehold transaction, SDLT was charged based on a percentage of the price paid for the property. This single sum was determined by the rate band within which the purchase price fell.

However as of today, for freehold purchases and leasehold premiums, the portion of the transaction value up to £150,000 will be charged at a rate of 0%, the portion between £150,001 and £250,000 will be charged at a rate of 2%, and the portion over £250,000 will be charged at a rate of 5%.

Also with effect from today, a new 2% rate for rent paid under a non-residential lease is introduced for high-value leases with a “net present value above £5m”, with rate bands as follows: 

•             £0 to £150,000: 0%
•             £150,001 to £5,000,000: 1%
•             £5,000,001 and over: 2%

If you have exchanged contracts before 17 March 2016 but will be completing on or after that date, you may qualify for the previous rates, and if you do so, you can choose to pay SDLT using the current or previous rates depending on which produces the lower SDLT Liability.

Bruce Faulkner commented “Whilst this new banding system aims to cut tax many businesses pay when purchasing non-residential property, and will benefit smaller owner occupier businesses, it will significantly increase the SDLT payable on higher value premium non-residential and commercial transactions.  We are currently experiencing a very busy market and this move will further help prevent values ‘sticking’ at the top of each rate band as they were prone to do under the previous system.”

For further information or to discuss how this might affect your transaction please contact Bruce Faulkner on 01603 675609 or Yvonne Benner on 01603 675605.