A new Stamp Duty Land Tax (“SDLT”) rates structure for sales and leases of non-residential and mixed use property became applicable from 17 March 2016, with higher charges for higher value transactions.

The new rates and tax bands are now 0% for the portion of the transaction value up to £150,000; 2% between £150,001 and £250,000, and 5% above £250,000.

Commercial premises - Sydney Mitchel SDLTBuyers of commercial property worth up to £1.05 million are now liable for less in SDLT.

In addition, as from 1 April 2016, higher rates of SDLT became applicable to second homes and investment properties. 

Purchasers of mixed-use properties (i.e. those with a commercial and residential element such as a ground floor shop with flat above) and other non-residential property will know that the SDLT charged on commercial properties is not the same as that charged on residential properties.  A purchaser of a non-residential property will not be liable for the higher rates of SDLT even if it is later converted into residential property.

So what is a “non-residential” property?  The HM Revenue & Customs guidance provides that “non-residential property” includes the following:

  • Commercial property such as offices and shops
  • Agricultural land
  • Bare land even if it is subsequently used for residential purposes
  • Forests
  • Any other land or property which is not used as a residence
  • 6 or more residential properties bought in one single transaction
  • A mixed use property (one with both commercial and residential elements)

There is however considerable confusion over the definitions used in different parts of the statute as to what comprises a 'commercial' as opposed to a 'residential' property and over details relating to completion and occupation of buildings, planning status and the treatment of land associated with buildings.

The Chartered Institute of Taxation has been in discussion with HM Revenue & Customs in a bid to iron out some of the uncertainty in these areas and a consultative process is now in train.

It is not known when revised guidance on any of the problem areas will be issued.

We can assist you with any property law or property tax matter. please contact Shilpa Unarkat on 0121 746 3300  / s.unarkat@sydneymitchell.co.uk or Sundeep Bilkhu on 0121 698 2200 / s.bilkhu@sydneymitchell.co.uk

Lexcel Practice Management Standard Birmingham Law Firm of the Year for 2011 Resolution Collaborative Family Lawyer The Law Society Accredited in Family Law UK Legal 500 2016 Conveyancing Quality Scheme