Much of the talk that surrounds stamp duty land tax centres on residential rates and how new rates will affect first-time buyers and those higher up the property chain.
Very little is discussed when it comes to non-residential stamp duty, despite the fact that it is an important issue, particularly in this difficult economic climate.
Despite the fact that the UK economy and much of Europe is stagnating, the need for businesses to invest for the future remains in place. Expansion can take many different forms, including hiring new staff, broadening the range of products and services offered and exploring new markets.
It can also include moving to larger premises. Commercial property prices have been hit hard by the economic downturn, so for businesses that have the money to move to larger offices, there are some attractive deals around.
However, there is also the need to consider commercial rates of stamp duty, which can add several thousand onto the purchase price.
If you are considering investing in new premises, it is important to understand what commercial stamp duty is and how it applies to you.
What is commercial stamp duty?
Commercial stamp duty – also known as non-residential stamp duty – is a tax on transactions involving property not designated for residential use.
What types of property does the term ‘commercial’ cover?
Commercial essentially refers to non-residential properties, including shops, offices, agricultural land, forests, six or more residential properties bought in a single transaction and any other land or property that is not used as a place to live.
What are the rates of commercial stamp duty?
For properties costing up to £150,000 with an annual rent under £1,000, no stamp duty is payable.
A one per cent rate is levied on transactions involving properties up to £150,000 with an annual rent above £1,000.
The same rate is applied to commercial properties in the £150,000 to £250,000 bracket, with a three per cent rate applied to properties costing between £250,000 and £500,000.
If you buy a property costing in excess of £500,000, you will have to pay a four per cent rate of stamp duty.
What if I buy a mixed-use property?
Mixed-use properties usually contain commercial and residential elements and some are unsure of which bracket such properties fall into when it comes to stamp duty.
If you are buying such a property, you will have to pay commercial rates of stamp duty land tax.
Are there any exemptions from stamp duty on commercial transactions?
Unlike with residential transactions, there are currently no exemptions in place for businesses looking to purchase new premises.
Aside from the zero per cent rate on buildings below £150,000 and with an annual rent below £1,000, all other transactions will incur stamp duty.
Are there any ways to reduce stamp duty?
Businesses could potentially save themselves a significant amount of money through stamp duty mitigation.
Also known as stamp duty planning, mitigation is a planning tool that interprets UK tax laws and identifies loopholes that could see you reduce or avoid stamp duty altogether.
Is stamp duty mitigation the same as tax evasion?
Mitigation is not a form of tax evasion, as it interprets the law as opposed to ignoring it.
Where can I find out more about mitigation?
Many mitigation firms operate in the UK, so it is worth your while shopping around and enquiring about how much you could potentially save.
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