Most people understand that Stamp Duty Land Tax (SDLT) is a tax that you pay when you purchase residential or commercial property. Many people aren’t aware that it is also payable, subject to minimum thresholds being met, by a tenant upon acquiring a new commercial lease. SDLT is imposed on the value of the lease transaction. Here’s a guide to understanding SDLT liability for commercial property leases.
What is Stamp Duty Land Tax (SDLT)?
Stamp Duty Land Tax (SDLT) is a tax on land and property transactions in England and Northern Ireland. For commercial property leases, SDLT is calculated based on the Net Present Value (NPV) of the rent payable over the lease term, as well as any premium paid.
How do I Calculate SDLT Liability on Commercial Leases?
Stamp Duty on the Net Present Value (NPV) of the Rent
The NPV of the rent is the total value of all rent payments over the lease term, discounted to present-day value. The calculation of the NPV itself is complicated but HMRC’s SDLT Calculator will perform the calculation for you. The SDLT rates payable on the NPV of the rent are then as follows:
- Up to £150,000: 0%
- Over £150,000: 1% on the amount exceeding £150,000
Stamp Duty on Premiums
If a premium (an upfront payment for the lease) is paid, SDLT is also payable on the premium and is calculated similarly to SDLT on commercial property purchases. The SDLT rates for lease premiums are:
- Up to £150,000: 0%
- £150,001 to £250,000: 2%
- Over £250,000: 5%
Filing and Payment
An SDLT return must be submitted, and the tax paid within 14 days of the “effective date” of the lease (typically, but not always, the lease commencement date). When leasing commercial property it is therefore essential to understand this and make any applicable payment to HMRC in order to avoid any interest or penalties for late payment. When we represent you in a lease transaction, we prepare and file the relevant tax return for you.
Conclusion
Understanding your Stamp Duty Land Tax obligations is crucial for tenants when taking a lease of commercial property premises and is therefore one of many reasons why you should consider appointing a commercial property solicitor in such a transaction. If you’re considering a commercial property transaction, we’re here to help guide you through the process.
Contact us
☎️ Call our Wakefield office on 01924 290 029
☎️ Call our Garforth office on 0113 246 4423
☎️ Call our Sherburn in Elmet office on 01977 350 500
☎️ Call our Mapplewell office on 01226 339 009
☎️ Call our Ossett office on 01924 586 466
The content of this blog post is for information only and does not constitute formal legal advice and should not be relied upon as advice. Thornton Jones Solicitors Limited accepts no liability for any such reliance upon this content. Where the post includes links to external websites, Thornton Jones Solicitors Limited accepts no responsibility for the content of such sites. Any link to a third-party website should not be construed as endorsement by Thornton Jones Solicitors Limited of any content, products or services which are outside our direct control.
