Stamp Duty Land Tax

Stamp Duty Land Tax (“SDLT”) is the self assessment tax which replaced the old stamp duty for property purchases from December 2003. Historically, documents were “stamped” with the level of duty paid whereas now a Return must be sent to the Revenue with the appropriate tax payment. SDLT is calculated as a percentage of the purchase price ranging from 1% for purchases above £150,000 (£125,000 for residential premises and £250,000 for first time residential buyers), 3% above £250,000.00, 4% above £500,000 and 5% above £1,000,000 after April 2011 (residential properties only). A purchase for £250,000.00 means tax of £2,500.00 whereas one penny over £250,000.00 means tax of £7,500.00. With commercial properties where VAT is paid on the price, SDLT is payable on the VAT inclusive figure – tax on tax. With leaseholds, the calculations become even more complex.

VAT

The general rule is that VAT is not payable on disposal of commercial property. However there is an exception which allows VAT to be charged where there has been an election to waive the exemption which is otherwise known as opting to tax. A landlord may choose to opt to tax where he wishes to recover VAT or costs associated with the property which cannot ordinarily be recovered in day to day trading. A tenant may choose to opt if he wishes to recover VAT on fitting out costs or other works not ordinarily within its day to day business. When an election has been made there is a cooling off period but once that is over the election remains in force indefinitely unless the individual or company which made the election can bring itself within very limited exceptions. Where a property is being sold and both parties are registered for VAT, VAT will not be due provided certain conditions are satisfied. Such a transaction is classified as the Transfer of a Going Concern or TOGC for short.

For advice on VAT on property transactions please contact:

Glyn Evans on 01934 637911 e-mail evans@powellslaw.com or
Stephen Soper on 01934 637915 e-mail soper@powellslaw.com.

See also our Shops & Offices, Agricultural and Pubs, Clubs, Hotels & Restaurants fact sheets (PDF).