Introduction
Stamp Duty Land Tax (SDLT) is a transaction tax payable on most commercial property purchases in England and Wales. Buyers should understand how SDLT applies to their specific transaction, as liability can vary depending on price, structure and tenure
How Commercial SDLT Works
Commercial SDLT is calculated on a tiered basis, with different rates applying to portions of the purchase price rather than a single flat rate.
This system applies to:
- Freehold purchases
- Lease premiums
- Certain lease assignments
Unlike residential property, there are no additional SDLT surcharges for companies or overseas buyers when purchasing commercial property
SDLT on Leasehold Transactions
SDLT on leasehold commercial property can involve two components:
- SDLT on any lease premium (if paid)
- SDLT on the Net Present Value (NPV) of rent
The NPV calculation considers:
- Annual rent
- Lease length
- Rent review structure
This can make SDLT on leases more complex than freehold purchases, particularly for longer or higher-value leases.
Mixed-Use Property
Mixed-use property (for example, a building with both commercial and residential elements) may be treated differently for SDLT purposes.
In some cases:
- Commercial SDLT rates may apply to the entire transaction
- Residential surcharges may not apply
Mixed-use treatment is fact-specific and should always be confirmed with professional advice before exchange.
When SDLT Is Payable
SDLT must usually be:
- Calculated
- Declared
- Paid
Within a set period following completion.
Late submission can result in penalties and interest.
Reliefs and Special Circumstances
Certain SDLT reliefs may be available, depending on the nature of the transaction.
Examples include:
- Property reconstruction relief
- Multiple dwellings relief (in limited mixed-use cases)
- Certain intra-group transactions
Reliefs are not automatic and must be claimed correctly.
Budgeting for SDLT
Buyers should treat SDLT as:
- A non-recoverable transaction cost
- Payable regardless of future performance
- Part of the upfront capital requirement
Failing to account for SDLT early can affect funding and completion timelines.
SDLT and Professional Advice
Because SDLT treatment can vary significantly between transactions, buyers are strongly advised to:
- Confirm liability early
- Obtain solicitor or tax advice
- Avoid assumptions based on residential rules
Errors in SDLT calculation can be costly and difficult to rectify
What Comes Next
In addition to SDLT, some buyers may be able to recover tax value through allowances linked to the property itself.
This is covered in the next section:
Reclaiming Capital Allowances on Commercial Property.
- Previous Article:
- Next Article: