Do I Have to Pay Stamp Duty on a Commercial Property Lease?
Many commercial tenants are unaware of the fact that Stamp Duty Land Tax (SDLT) can be payable on the grant, assignment, variation or surrender of a commercial lease, where the total value of the transaction is above certain thresholds.
The rules regarding payment of SDLT are complex, and while the tax is not payable on all commercial leases, it is important to note that failure to pay on time, for whatever reason, can result in liability for the overdue payment with accrued interest, in addition to a fine.
On the other side of the coin, if a company or individual overpays their SDLT, it is not easy to obtain a refund from HMRC, so in both cases it is important to get the calculation right first time round.
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How is Stamp Duty Land Tax Calculated on Property Leases?
SDLT is calculated based on any lease premium paid by the tenant and on the rent due under the terms of the lease (including VAT if applicable). Once the length of the lease is factored in, the Net Present Value (NPV) of the lease can be determined, along with the amount of SDLT that is due. The rent figure used in the calculation is arrived at based on the first five years of rent payments, and where a lease term exceeds five years, the highest amount paid over any 12 month period during the first five years will be used to calculate the NPV for any succeeding years.
To complicate matters however, SDLT can also be applied to certain other payments made under the terms of a lease, and also to ‘chargeable considerations’, such as a commercial tenant’s obligations to carry out work or services on a rented property.
When Does Stamp Duty Land Tax Need to Be Paid?
Payment of SDLT is due within 30 days of the ‘effective date’ of the transaction, which can be when the contract is completed, when the tenant moves in, when the first rent payment is made, or when ‘substantial performance’ of the transaction has taken place in some other way.
The tenant is solely responsible for calculating the amount of SDLT that is due and for making payment on time. It is also important to note that SDLT can become payable again during the term of a commercial lease, in circumstances including where a lease is renewed or extended under new terms, the rent payable is revised following a rent review, or a tenant remains in occupation after the original lease expires.
Solicitors Advising on Stamp Duty Land Tax on Commercial Leases
The commercial property law department at Bartletts Solicitors can advise prospective and current tenants on their legal obligations regarding Stamp Duty Land Tax, including whether you are liable to pay SDLT, and if so, how much. We can also help with the completion of the necessary forms for submission to HMRC, which can be complicated to fill out. Contact our commercial property solicitors today for a free initial consultation and to deal with your SDLT liability promptly, efficiently and cost-effectively.
Do I Need to Register My Commercial Lease?
Many commercial leases need to be registered. If a lease is not registered it will be difficult to sell your business. We offer a fixed fee service for registering a commercial lease.
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For further information or advice about any aspect of Commercial Conveyancing please, contact Bartletts Solicitors today at our Liverpool, Chester or Wrexham offices or email advice@bartletts.co.uk.
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