Commercial Developers and Stamp Duty Land Tax: The Key Issues

Q: Do Developers Need to Worry About Stamp Duty Land Tax (SDLT)?

Stamp Duty Land Tax (SDLT) is not straightforward; there are a lot of traps that developers can fall into which should be taken into account in your original development appraisal.

Q: What Are the Rates of Stamp Duty Land Tax (SDLT)?

The rates of SDLT vary widely between commercial and residential. A commercial purchaser could be used to looking at rates of SDLT of 4%. A residential purchaser could be used to looking at rates of SDLT of up to 15%. As a result of changes in government policy, companies buying residential property in a corporate wrapper, will pay SDLT at a rate of 15%.

Developers buying residential or mixed-use property can benefit from the developers exemption. So although they may buy the property in a corporate wrapper, they will be exempt from the 15% rate and will pay SDLT at a much lower rate.

Q: What are the 5 Common Traps With Stamp Duty land Tax?

There are several common traps in relation to SDLT:1. When is SDLT payable. It is actually payable on the effective date of a transaction which is not necessarily the date of completion; many buyers do not actually realise that.

2. Deferred consideration: Where there is an element of deferred consideration, SDLT is payable on the date of completion or the effective date – not the date on which that deferred consideration is payable.

3. Contingent or unascertained consideration: This could be overage or an additional element of the purchase price based on the grant of planning. In those cases you can apply to defer the payment of Stamp Duty Land Tax but you do need to make a reasonable estimate and pay SDLT at that point on the reasonable estimate.

4.VAT: Stamp Duty Land Tax will always be payable on the VAT inclusive price not the net price.

5. Rent review: Many people don’t actually realise that a further SDLT payment will be once a rent review has taken place.

For more information on Stamp Duty Land Tax and considerations for developers please contact one of commercial property solicitors on 01895 207285, or email us at CRE@ibblaw.co.uk. Alternatively please visit https://www.ibblaw.co.uk/service/commercial-real-estate. Video Resources:Commercial Land Development Purchase : The Key Issues For Developers Tenant Considerations When Taking a Lease of Newly Built Premises

For further information please visit the respective page:

Commercial and Mixed-Use Developmenthttps://www.ibblaw.co.uk/service/commercial-real-estate/commercial-proper…

Commercial Property Investment and Managementhttps://www.ibblaw.co.uk/service/commercial-real-estate/commercial-proper…

Business Leases / Commercial Leases Solicitorshttps://www.ibblaw.co.uk/service/commercial-real-estate/business-leases

Commercial Property Financehttps://www.ibblaw.co.uk/service/commercial-real-estate/commercial-proper…