Last Updated May 23, 2019

Law and Practice

Authors



Hawkins Hatton Corporate Lawyers Ltd is a niche corporate law firm formed in December 2005 and based in London and Dudley, dealing primarily with corporate and commercial work together with commercial property and litigation. Its client base includes European and Anglo-US companies, regional and national clients as well as individuals. The firm’s Real Estate department is best known for secured lending work on behalf of HSBC, Lloyds Bank, Santander and RBS, as well as all aspects of commercial property work on behalf of its SME client base, which spans a number of key industry sectors including pharmaceutical and healthcare, manufacturing, engineering and pension funds. It advises on a wide range of property-related matters, including commercial acquisitions and disposals, commercial leases, secured lending and corporate support. Hawkins Hatton also offers advice on a broad range of specialist areas such as property investment and finance, development schemes, compulsory purchase issues, construction and commercial leases for clients including landlords and tenants, public companies, banks, private companies, developers and investors.

Stamp Duty Land Tax (SDLT)

SDLT is payable by the buyer on all property transactions in the UK.

The rates of SDLT are determined by the price of the property and the designated use of the property (ie, whether it is commercial or residential).

Residential Property Rates

SDLT is payable on property prices above GBP125,000 in the following rates:

  • GBP0-125,000 – 0%
  • GBP125,001-250,000 – 2%
  • GBP250,001-925,000 – 5%
  • GBP925,001-1.5 million – 10%
  • >GBP1.5 million – 12%

Relief for First-time Buyers

No SDLT is paid by first time buyers on properties worth up to GBP300,000 and only 5% SDLT is paid on the portion of the purchase price between GBP300,001 and GBP500,000.

Any purchase above GBP500,000 will attract the rates detailed above.

Residential Leasehold Sales and Transfers

If a new residential leasehold property is purchased then SDLT is payable on the purchase price of the lease in the rates detailed above. In the event the total rent of the lease is GBP125,000 over the duration of the lease, then SDLT at a rate of 1% is payable above GBP125,000.

Higher Rates of SDLT

A 3% penal rate of SDLT applies on top of the standard rate for each subsequent purchase by a purchaser who owns one or more dwellings. 

Non-residential and Mixed-use Land and Property Rates

SDLT is payable on increasing portions where non-residential or mixed-use land is purchased for more than GBP150,000.

Non-residential property includes:

  • commercial property, eg, shops or offices;
  • agricultural land;
  • forests;
  • any other land or property which is not used as a residence; and
  • six or more residential properties bought in a single transaction.

A ‘mixed use’ property is one that has both a residential and non-residential element (such as a flat above a shop).

Non-residential and Mixed-use Land Rates

  • GBP0-150,000 – 0%
  • GBP150,001-250,000 – 2%
  • >GBP250,001 – 5%

Non-residential Leasehold Sales and Transfers

If a new non-residential leasehold property is purchased then SDLT is payable on the purchase price of the lease in the rates detailed above. In the event the total rent of the lease is GBP150,000 over the duration of the lease, then SDLT at a rate of 1% is payable above GBP150,000.

  • GBP0-150,000 – 0%
  • GBP150,001-5 million – 1%
  • >GBP5 million – 2%

SDLT Reliefs and Exemptions

The following reliefs can be applied for:

  • first-time buyers;
  • multiple dwellings;
  • building companies buying an individual’s home;
  • employers buying an employee’s house;
  • local authorities making compulsory purchases;
  • property developers providing amenities to communities;
  • companies transferring property to another company;
  • charities;
  • right-to-buy properties; and
  • registered social landlords.

Exemptions

SDLT is not payable and no SDLT return needs to be filed if:

  • no money or other payment changes hands for a land or property transfer;
  • property is left in a will;
  • property is transferred because of divorce or dissolution of a civil partnership;
  • freehold property is purchased for less than GBP40,000;
  • a new lease of more than seven years is purchased or assigned provided the premium is less than GBP40,000 and the annual rent is less than GBP1,000;
  • a new lease of less than seven years is bought or assigned lease, provided that the amount you paid is less than the residential or non-residential SDLT threshold; and/or
  • an alternative property financial arrangement is used.

SDLT on Residential Property Owned by a Corporate Vehicle

SDLT is charged at 15% on residential properties costing more than GBP500,000 bought by certain corporate entities. The 15% rate does not apply to property bought by a company that is acting as a trustee of a settlement or bought by a company to be used for:

  • a property rental business;
  • property developers and traders;
  • property made available to the public;
  • financial institutions acquiring property in the course of lending;
  • property occupied by employees; and
  • farmhouses.

In addition, there is a 3% surcharge on residential properties bought by companies.

SDLT on Shares in a Company

SDLT is payable at a rate of 0.5% of the entire transaction. SDLT will be payable on transactions including a change of control of a company if shares are sold.

Value-added Tax

Sale of Real Estate is exempt from VAT unless the seller has opted to tax the land and buildings. Most new build commercial properties will attract standard-rated VAT at 20%. If, however, a property is acquired with a sitting tenant, the 'transfer as a going concern' exemption will apply provided both parties are VAT registered and hence no VAT will be payable on the purchase price. This exemption only applies where the buyer opts to tax the property before the transfer.

Capital Gains Tax

CGT is payable by an individual on the disposal of residential real estate in the UK (other than the individual's main residence) in respect of the gain (profit) made at a rate of 28% for a higher-rate tax payer or a lower rate for a basic-rate tax payer. A 20% CGT rate applies for commercial property.

A UK-based company will pay corporation tax on the investment gain (subject to any indexation allowance, which now only accrues up to 31 December 2017) on the disposal of a commercial or residential property at a rate of 19%.

The CGT exemption for non-resident investors in respect of non-residential property will be removed from April 2019, albeit with exemptions.

'Non-resident' CGT (NRCGT) is payable at 28% on any (post-April 2015) gains made on UK residential property by individuals who are non-resident for tax purposes.

From 6 April 2019, NRCGT is extended to (post-April 2019) gains in respect of commercial property, albeit with certain exemptions.

Hawkins Hatton Corporate Lawyers Limited

Foxglove House
166 Piccadilly
London
W1J 9EF

+44 020 8191 7893

N/A

crodrigues@hawkinshatton.co.uk www.hawkinshatton.co.uk
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Authors



Hawkins Hatton Corporate Lawyers Ltd is a niche corporate law firm formed in December 2005 and based in London and Dudley, dealing primarily with corporate and commercial work together with commercial property and litigation. Its client base includes European and Anglo-US companies, regional and national clients as well as individuals. The firm’s Real Estate department is best known for secured lending work on behalf of HSBC, Lloyds Bank, Santander and RBS, as well as all aspects of commercial property work on behalf of its SME client base, which spans a number of key industry sectors including pharmaceutical and healthcare, manufacturing, engineering and pension funds. It advises on a wide range of property-related matters, including commercial acquisitions and disposals, commercial leases, secured lending and corporate support. Hawkins Hatton also offers advice on a broad range of specialist areas such as property investment and finance, development schemes, compulsory purchase issues, construction and commercial leases for clients including landlords and tenants, public companies, banks, private companies, developers and investors.

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