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The Impact of the Stamp Duty Land Tax Surcharge on Commercial Property

We are all aware of the Stamp Duty Land Tax higher rates payable on the purchase of second homes or buy-to-lets which has imposed a surcharge of 3% on these properties since 1st April of this year, and the effect of this on the residential property market has been widely debated.  However have you considered the impact this may also have on the commercial property market?

Any purchase by a company is automatically subject to this surcharge, which needs to be factored in to the total cost and will make it more expensive.  This will have implications not only for corporate only purchases, but additionally for shares of or a beneficial interest of a company in jointly-owned property.  It will be charged even on land not yet built on but designated to be used for dwellings as there is no exemption for property to be redeveloped or intended for non-residential use, provided it satisfies the test of being a dwelling at the effective date of completion. It will need to be taken into account as affecting the residential element of mixed use property and development property owned by a company, both residential and commercial.

There is no exemption for the size of the company, or the nature of its business. Purchases by building companies will therefore still be subject to the surcharge, which will hit both large and small operators initially unexpectedly in view of previous exemptions.    

You may be aware that purchases of dwellings costing more than £500,000 by companies are also, subject to certain exceptions, liable to a punitive “higher rate” (not “higher rates”!)  charge to Stamp Duty Land Tax of 15%.  This will apply whether the building is used as a dwelling at the effective date or suitable for such use as intention has no relevance here.  In a recent case a company which operated nursing homes bought a house for £2m, intending to turn it into a nursing home.  After an enquiry it was assessed as chargeable at the 15% rate, not the lower level applicable to purchases of non-residential properties by companies claimed, as the higher rate applied irrespective of the building’s ultimate commercial purpose.

However there is some limited relief in that properties which are liable to the 15% rate will not attract the 3% surcharge, so although the regime may increase the cost having a potentially inhibiting effect on some dealings with commercial property there is no double whammy here.

Stamp Duty Land Tax for companies can be a minefield and if you would like our assistance or guidance on your matter one of our knowledgeable and informative Commercial Property solicitors at Bromley, Camberwell, Crystal Palace, West Wickham or Raynes Park will be able to help you (although in extreme cases such as the one above you may wish to refer it to a specialist tax adviser or consultant). 


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