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Budget Brings In Changes to Commercial Property Stamp Duty System

Written by: John Padgett on Friday 18/03/2016

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The Budget announcements made by the chancellor George Osborne in recent days included details on changes to the UK’s commercial property stamp duty system.

As of March 17th 2016, the ways in which stamp duty calculations relating to freehold commercial properties and leasehold premium transactions are carried out were changed and the impact could be significant.

Key to the new calculation process is the introduction of different rates and tax bands which will replace the old system which would assess stamp duty obligations on the basis of entire transactions.

“At the moment, a small firm can pay just £1 more for a property and face a tax bill three times as large. That makes no sense,” Mr Osborne told the House of Commons during his Budget speech.

“So from now on, commercial stamp duty will have a zero rate band on purchases up to £150,000; a 2 per cent rate on the next £100,000; and a 5 per cent top rate above £250,000,” he explained.

Among the consequences of the changes will be reduced stamp duty demands on anyone buying a commercial property worth up to £1.05 million.

On the other hand, investors in larger and more expensive commercial properties throughout the country are set to see an increase in the amounts that they need to pay as stamp duty in relation to their transactions.

According to the British Property Federation (BPF), this could be bad news for local and regional economies across the UK.

Commercial property investment can often act as the catalyst for regional growth and as the economy has recovered investment has been spreading out from London to the UK’s regions, but will now undoubtedly slow,” said Melanie Leech, chief executive of the BPF.

“The real set back is that development in places like the Northern Powerhouse and Midlands’ Engine will now be held back as a result of this out of the blue raid on commercial property transactions,” she said.

In defence of the changes introduced in his Budget, the chancellor said that while the parties involved in 9 per cent of commercial property transactions will now pay more in stamp duties, 90 per cent can expect to “see their tax bills cut or stay the same”.

Key to the new calculation process is the introduction of different rates and tax bands which will replace the old system which would assess stamp duty obligations on the basis of entire transactions.

Written by: John Padgett on Friday 18/03/2016

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