High value residential transactions by companies and partnerships have, since March 2014 been subject to a 15% Stamp Duty Land Tax (SDLT) charge. As of 1st April 2016 further reliefs from this higher rate of tax became available for Property Businesses.
Where companies or partnerships buy residential property over £500,000 for the purposes of collective investment a higher rate of SDLT 15% is due. However, where a relief applies, the normal rates of SDLT will apply instead, i.e. 5%, 10% or 12% depending on the value of the transaction.
For the Property Business relief to apply the property must be exclusively used for one or more of the following;
- As a source of rent in a property rental business (to qualify the business must be a business that is subject to corporation tax)
- As a business premises for a property rental business
- Development (or redevelopment) with a view to resell or rent the property
- Resale in the course of a property development business; or
- Resale in the course of a property trading business (where the stock of the business is property).
The property must continue to be used for the relief giving purpose for at least three years after the effective date of the transaction. Where the property ceases to be used for that purpose, or ceases to be exclusively used for those purposes, within three years the additional tax will become due and can be clawed back by HMRC.
The above reliefs are in addition to the existing reliefs already available to companies and partnerships which include properties made available to the public, financial institutions acquiring property in the course of lending, properties occupied by employees and farmhouses. For more information on these reliefs and others visit https://www.gov.uk/stamp-duty-land-tax/overview.
If you are a company or partnership looking to invest in residential property and would like more information or guidance on the topic our specialist team of commercial property solicitors can help. Contact us on 0800 088 6004.