Budget 2016 – Stamp Duty

Stamp Duty Land Tax (SDLT)

The pre-announced 3% surcharge on certain residential properties that was scheduled to come into effect on 1 April 2016 is going ahead largely as planned.  There was a surprise, but welcome change to the SDLT regime for commercial properties.  The changes can be summarised as follows.

Commercial properties

From 17 March 2016, the existing “slab-system” will be replaced with a much fairer progressive rate system.  In general terms, the purchase of a small commercial property will now cost less in the future, whereas the purchase of a large commercial property will cost more.  For example, the purchase of a commercial property for £275,000 will now incur a SDLT liability of £3,250 (previously £8,250), whereas the purchase of a commercial property for £5 million will now incur a SDLT liability of £239,500 (previously £200,000).  The new rates of SDLT for commercial properties are:

Purchase price:                       Rate

First £150,000                          0%

The next £100,000                   2%

Thereafter                                5%

There will also be an increase in the SDLT charge on new commercial leases where the Net Present Value of the lease rentals exceeds £5 million.  To the extent that the NPV exceeds £5 million, the SDLT rate will now be 2% (currently it is 1%).

 

Residential properties

The government are to go ahead with the previously announced 3% SDLT surcharge on certain residential properties and the new rules will apply to property completions that take place on or after 1 April 2016.  With Easter being at the end of March, we anticipate the next few weeks will be an extremely busy (and slightly stressful!) time for solicitors and lenders.

The new rules are relatively complex (the consultation document issued in January contained 42 worked examples!), but in summary they will catch companies (even if the company only owns one property) and individuals who own two or more properties.

The January consultation document explained that an exemption would apply where the “second” property being purchased is going to be the individual’s main residence and is replacing the individual’s former/current main residence (providing the former/current main residence is sold either 18 months before or 18 months after the purchase of the “second” property).  The good news is that this replacement time period has now been extended from 18 months to 36 months.

There was mention in the consultation document of a further exemption for the bulk purchase of 15 or more residential properties, but the government has now decided to drop this relief from the new rules.  We think this change is logical if the government’s policy aim behind these new rules is to discourage buy-to-let landlords from purchasing further residential properties.

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Nov 19

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