SDLT Changes for Commercial Property from Midnight on the 16 March 2016!

During the 2016 Budget, the Chancellor of the Exchequer, George Osborne announced the abolition of the SDLT slab rates for commercial property in England and Wales at midnight on the 16 March 2016.  This follows the introduction of progressive SDLT rates for residential property in December 2014.

The new rates effective from midnight on the 16 March 2016 and for any commercial properties exchanged on or after 17 March 2016 will be charged on the portion of the purchase price which falls within each rate band.  The new SDLT rates and thresholds for freehold purchases and lease premiums are:

Transaction Value Band         SDLT Rate

£0 - £150,000                               0%

£150,001 - £250,000                    2%

£250,000 +                                   5%

A new SDLT rate band has also been introduced for leasehold transactions.  On and after 17 March 2016 a new 2% rate for a non-residential lease will apply to that amount of the net present value (NPV) of the rent which is above £5 million.  The new SDLT rates and thresholds for rent paid under a lease are:

NPV of Rent                          SDLT Rate

£0 - £150,000                              0%

£150,001 - £5,000,000                1%

£5,000,000 +                               2%

There are transitional rules in place where contracts have been exchanged but the sale has not completed on or before 17 March 2016.  In these circumstances it will be possible to choose between the old and the new SDLT rules. These transitional rules may not apply to certain transactions which involve (for example) any variation, assignment or sub-sale of the original contract or which arise from the exercise of certain rights or options.  Exchanging a contract today but varying the price paid or the demise is likely to result in the payment of SDLT at the new higher rates.