When may Stamp Duty Land Tax be payable in a GP Surgery transaction?

GP Partnerships may benefit from statutory exemptions in some transactions however, when purchasing property or entering into a new lease, these exemptions may not be available and it is important to understand and assess your SDLT liability in each instance.
Please note that Land Transaction Tax (LTT) is payable on transactions in Wales rather than SDLT. Although similar principles apply to both SDLT and LTT the rules and legislation do vary. In the following we discuss SDLT only.

What is SDLT?

SDLT is payable on the consideration you pay as part of a land transaction this will often be the purchase price for a property or any premium or rent payable for a lease. The chargeable consideration can also include anything paid for assets that form part of the property such as buildings, the value of any repair work promised by the seller any fixtures and fittings and VAT paid on purchase price or rent. For leases, SDLT is payable on the "Net Present Value" (NPV) of the lease plus any premium paid.

To avoid penalties and interest, SDLT must be paid and a return filed with HM Revenue and Customs (HMRC) within 14 days of completion or the "effective date of any transaction". If you are planning on moving into your premises prior to the start date of your lease, this may change the 'effective date' of the lease for SDLT purposes and you should seek advice from your legal advisors and/or accountants before moving into the property. Fines and penalties may apply for late submission and it is important to file the return and pay any SDLT due promptly following completion of the transaction (or earlier if applicable).

SDLT liability is a complex area and your liability may be influenced by the specific circumstances of your transaction. In the following we have reviewed some particular instances which may impact your SDLT liability however, you should always discuss any potential SDLT liability with your accountant.

Rent reviews

SDLT due on a lease is calculated with reference to the rent payable over the term of the lease. This is calculated based on the highest rent paid in a 12 month period in the first 5 years of the lease, a further return may need to be submitted to HMRC and further tax may become payable.

You should diarise any rent review dates and liaise with your accountants at this time to understand any liability that may arise.

Holding Over under the 1954 Act

If you occupy your property under a lease you may benefit from the statutory protection of the Landlord and Tenant Act 1954 and have an automatic right to renew your lease on similar terms. When the contractual term of the existing lease comes to an end you may continue to occupy the property and this is referred to as 'holding over'.

SDLT may be payable for each year that the tenant remains in occupation under the old lease, this will be payable as if the old lease was granted for a term of one year longer. An SDLT return must be filed within 30 days of the end of the first year of holding over and within 30 days of the end of every additional year to avoid interest and penalties.

How SDLT is charged on periods of holding over depends on the contractual termination of the old lease and the commencement of the new. For advice on how your lease may incur holding over liability, please consult your accountant.

Break clauses

Where there is an option to terminate a lease in its first 5 years, SDLT may still be payable on the full term, even if this break is exercised.

Linked transactions

SDLT liability will also be varied where more than one transaction is linked to another, for example where the same tenant and landlord enter into successive leases or the same seller and purchaser enter into an agreement for more than one parcel of land.
Where transactions are linked, they will be treated as one transaction and the nil rate threshold is not separately available for each transaction. This can mean that a higher rate of SDLT is payable on linked transactions, and due care must be paid when assessing your SDLT liability.

Linked transactions form part of a single scheme, arrangement or series of transactions between the same vendor and purchaser (or landlord and tenant), or persons connected with them. Connected individuals include spouses, civil partners or relatives.

Transactions will not necessarily be linked just because they are between the same buyer and seller, or persons connected to them and a full assessment of the facts must be undertaken at the time to ascertain your SDLT liability. To understand whether your transaction is part of a linked transaction, consult with your accountant and legal advisors.

Your legal advisors and accountants can support you in determining your SDLT liability and you should seek advice as soon as possible when dealing with your property.

When may Stamp Duty Land Tax be payable in a GP Surgery transaction?