Latest Information

Tax for Tenants

19/07/2012

Many tenants think Stamp Duty Land Tax (SDLT) only applies when buying (rather than leasing) commercial premises. This is wrong.

SDLT also applies on the grant of a new lease where the rent, calculated over the term of the lease, together with any lump, exceeds the threshold set by the Inland Revenue.

The rent threshold is currently £150,000 and actually captures a large proportion of leases - for example: a 10 year lease at a rent of £20,000 per annum plus VAT of £4000 p.a. attracts SDLT of £495. SDLT is payable within 30 days of completion/sooner occupation and must be accompanied by an SDLT return submitted to the Inland Revenue to avoid interest and penalties.

There are ways to mitigate SDLT, for example, by taking a shorter lease with an option to renew – SDLT is calculated on the initial term and a further SDLT calculation is needed only if the option is taken up.

Rent free periods can reduce the tenant’s tax liability or perhaps bring it below the taxable threshold. There are additional rules for abnormal rent increases, turnover rent leases etc.

Tenant’s can use the Inland Revenue’s handy Lease SDLT calculator to carry out calculations before committing to new lease terms with a landlord:
http://www.hmrc.gov.uk/sdlt/calculate/calculators.htm

KBL include the calculation of SDLT and the preparation of the SDLT return within their standard fixed fee for leases.

For more information or a fixed quote for lease work please contact Helen Marsh, Property Associate, on 01204 527777 or at hmarsh@kbl.co.uk. More information and testimonies from satisfied clients are available at www.kbl.co.uk.