Contributed By Hawkins Hatton Corporate Lawyers Ltd
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:
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:
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
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.
SDLT Reliefs and Exemptions
The following reliefs can be applied for:
SDLT is not payable and no SDLT return needs to be filed if:
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:
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.
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.