Stamp Duty Land Tax (SDLT) is payable by companies on acquisition of residential and commercial properties in the UK.
The SDLT for limited companies can be complex because the duty payable is dependent on several factors like property type, shareholder’s residence status, and relief or exemptions the property may be entitled to.
Different tax rates apply for residential, commercial, and mixed-use properties. Being careful and seeking proper advice is really important because mistakes in calculations or paying too little can result in penalties from HMRC. Further not getting the reliefs/exemptions you’re entitled to can lead to unwanted cash leakage.
Let’s explore the nuances of stamp duty land tax for limited liability companies.
What is Stamp Duty Land Tax (SDLT)?
SDLT, as you can well imagine, is a type of tax you have to pay for buying a residential or commercial property in England and Northern Ireland (NI).
Any company purchasing a residential property for £40,000 or more must pay the stamp duty land tax. Unlike, individuals, the companies are not entitled to the standard rate that apply to purchase of first property or the first-time buyers.
However, the SDLT is not applicable in Scotland and Wales. In Scotland, you will pay Land and Building Transaction Tax and in Wales, Land Transaction Tax. The rates for both these taxes are different and out of scope for our discussion today.
SDLT for Limited Liability Company Landlords
The SDLT structure for landlords of limited liability companies is quite complex. So, make sure to read every bit of information with care.
The companies or other non-natural persons such as partnerships where one or more partners is a limited company or collective investment schemes, have to pay the 3% SDLT surcharge applicable to purchase of additional properties in England and Northern Ireland.
For companies purchasing properties with a market value of £500,000 or more, the SDLT is flat 15%.
If the company is purchasing a property for a rental business, property development, farmhouse, or a trading company buying for employees to occupy the property, they can claim an exemption from the 15% stamp duty land tax rate. The exemption also applies to properties bought by a housing co-operative, or a financial institution for lending purposes.
The Homes for Ukraine Sponsorship Scheme and SDLT
The Homes for Ukraine scheme is meant to provide support and shelter to the people evading the war-torn country. As part of the measures to support Ukranian refugees, the government announced a temporary relief on Annual Tax on Enveloped Dwellings (ATED) and the 15% rate of Stamp Duty Land Tax (SDLT)
Limited companies or non-natural persons buying properties to make it temporarily available or use it for Ukranian refugees will not have to pay the 15% SDLT. This relief is applicable when the said property will be occupied by the refugees under the scheme.
2% surcharge – non-resident companies
From 1 April 2021, a 2% surcharge applies to non-resident companies buying a residential property in the England and NI. The 2% surcharge is in addition to the higher rates (3%) or the 15% rate. So, a non-resident company could be subject to a SDLT rate of 17%.
The following rates apply for non-resident companies from 23rd September to 31st march 2025:
|Band||SDLT rate for companies (UK resident)||Non-resident surcharge and Higher rates|
|Up to £250,000||3%||5%|
|£250,001 – £925,000||8%||10%|
|£925,000 – £1,500,000||13%||15%|
Generally, a company will be non-UK resident for SDLT purposes, if on the date of completion, either:
- The company is non-resident for corporation tax purposes.
- The company is UK resident for corporation tax purposes but is a close company and controlled by non-UK resident/s.
The test for determining non-UK control is complex as a number of factors have to be considered when establishing who has the control and we therefore recommend you seek advice.
Further, the following companies are excluded from the 2% surcharge:
- Property authorised investment funds (PAIFs)
- 51% body corporate subsidiaries of a PAIF.
- UK real estate investment trusts (REITs)
- A member of a group UK REIT
- A company acting as a trustee of a settlement.
Commercial or mixed use property
When it comes to investing in commercial or mixed-use properties, understanding the SDLT implications is crucial. When a company purchases such properties, they are subject to the regular freehold and leasehold non-residential rates. Unlike residential properties, there is no 3% surcharge applied to non-residential properties when companies are the buyers.
So, if the company buys a new office, retail store, a building with flats and shops or any other commercial venture, the non-residential rates will apply.
Further, if the company is buying a residential property which is derelict or unsuitable for use as a dwelling on the date of completion, the non-residential rates of SDLT can be claimed which could be significantly lower than the residential rates.
Can a company claim SDLT relief and exemptions
The company may be entitled to the following reliefs and exemptions when purchasing a property in England:
- Multiple dwellings relief – if two or more residential properties are purchased in a single or linked transaction.
- Building companies or property traders buying an individual’s home – If a building company purchases an individual’s old home where they are purchasing a new home from them, the SDLT can be exempt on the property purchased by the builder, t if certain conditions are met.
- Group companies: Relief for SDLT can be claimed if a property is transferred between companies that are part of the same group.
- Property developers providing amenities to communities due to planning obligations
- registered social landlords
- Freeport tax sites – if a property is purchased in a designated freeport site and used for a qualifying purpose, the SDLT could be exempt.
The above list is not exhaustive. There are other reliefs and exemptions that may apply to purchases by companies.
The new SDLT rates, which came into effect from September 2022, will run until 31st March 2025. Understanding of the stamp duty land tax rate that will apply to the purchase of a property is essential before a limited company landlord buys a property as it is often difficult to make a claim of overpaid tax and strict timelines apply.