From slab to slice – commercial property SDLT changes

Posted by John Shallcross on
Following today's Budget, and from midnight tonight, purchasers of non-residential property will be subject to a revised structure of Stamp Duty Land Tax (SDLT).

In line with the changes made to SDLT on residential properties, the new commercial property tax rates are to work on the 'slice' not the 'slab' system. So instead of SDLT being charged at a single percentage of the price paid for the property depending on the price, it will now be charged at different rates on the portion of the purchase price falling within each rate band –

The first £0 to £150,000 will pay no SDLT

2% will be charged on the next £100,000 and

5% top rate is due for the part of the price above £250,000.

Also there is new 2% rate for high-value leases to the extent that the "net present value" of rents is above £5m, in place of the present 1%.

John Shallcross, leading real estate lawyer from national law firm Blake Morgan, said: "Although this is billed as a measure to help small businesses, there is no doubt that this is a revenue-raising measure expected to raise about £380m in the coming tax year. But it does reflect the changes made to Stamp Duty Land Tax in residential property which was deemed a success and slice rates seem more logical than slab rates.

"Whilst there are many more small businesses which will benefit from the new tax system, those buying more valuable properties will face the higher rate. We are seeing a number of clients now trying to get their current transactions exchanged before midnight so that they don't have to pay the new top 5% rate.

"It is likely to make commercial property a less attractive proposition for investors. Added to the time it takes to sell a property, these higher charges will be a disincentive for investors like pension funds and insurance companies, increasing transaction costs. However, this is unlikely to have a significant impact the commercial property market in the long term as it seems to be less susceptible to factors such as these than the residential market."

About the Author

John is an experienced real estate Lawyer with a background in agricultural and landed estate property work. He has also developed a specialisation as an adviser on the stamp duty land tax implications of property transactions.

John Shallcross
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