Stamp Duty is payable in respect of commercial property transactions whether you are buying the freehold or taking on a lease.
Stamp Duty Land Tax (Stamp Duty) is a tax payable on the acquisition of a freehold or leasehold property in England and Northern Ireland.
The amount payable is calculated with reference to the price or sometimes the value of the property. As well as the purchase of a freehold or leasehold interest, Stamp Duty can also be payable on the acquisition of other interests and rights in respect of land.
What is the Stamp Duty threshold on a commercial property transaction?
The threshold for stamp duty on a commercial property is £150,000, so if a commercial property transaction is above that value, either in the purchase price or lease acquisition, then a one-off Stamp Duty payment is due. This is payable to HM Revenue & Customs on completion or when 90% of the price is paid or when the purchaser takes possession of the property.
How much does Stamp Duty cost in 2021?
Freehold commercial purchase Stamp Duty rates 2021
Where the land or premises is not a residential property or is in mixed use, the Stamp Duty land tax is payable at the rates below. Non-residential property includes shops, offices, property that is not suitable for living in, agricultural land and when six or more residential properties are bought in a single transaction.
Mixed -use property is one that is used for residential and non-residential purposes, such as a shop with a flat above it.
| Property or lease premium or transfer value | SDLT rate |
| Up to £150,000 | Zero |
| The next £100,000 (the portion from £150,001 to £250,000) | 2% |
| The remaining amount (the portion above £250,000) | 5% |
Leasehold commercial purchase Stamp Duty rates 2021
Stamp Duty is payable on the purchase of a new non-residential or mixed use leasehold. It is due on both:
- The purchase price of the lease, with the Stamp Duty calculated using the above table; and
- The amount of annual rent payable, known as the net present value, is calculated on the basis of rent payable over the term of the lease divided by the number of years of the lease, as set out below:
| Net present value of rent | SDLT rate |
| £0 to £150,000 | Zero |
| The portion from £150,001 to £5,000,000 | 1% |
| The portion above £5,000,000 | 2% |
The two figures are calculated separately and added together.
If you are buying an existing lease, Stamp Duty is only payable on the price paid for the lease.
The difference between Stamp Duty and VAT
Although VAT is not generally payable on the sale of commercial property, a landlord can choose to waive this exemption and opt to tax. This could be an option where the landlord wishes to recover VAT, for example, in respect of costs incurred in maintaining the property.
Where the landlord has opted to tax, VAT is payable on the whole purchase price, with Stamp Duty also payable on the VAT element.
Stamp Duty on mixed-use property
Traditionally, buyers of properties with additional land and outbuildings have claimed that this constitutes a mixed-use property, with part of the premises used for agricultural purposes. HM Revenue & Customs are looking more closely at these transactions now, in light of the substantial savings that buyers can make by paying only commercial rates of Stamp Duty and not the much higher residential rates.
Those buying a property with a home office will need to pay residential rates. Self-contained business premises such as a separate office or surgery or part that is rented commercially is likely to qualify for commercial stamp duty rates.
Contact us
At Witan Solicitors, we represent landlords and tenants across a range of sectors in respect of commercial property disputes and we can help you with a range of commercial contracts.
If you would like to speak to one of our solicitors, email us at info@witansolicitors.co.uk or fill in our contact form and we will be happy to help you. We have offices in Birmingham, London and Northampton.
