What Is Stamp Duty for Business Transactions?
Stamp Duty and SDLT apply when businesses acquire property and shares. Learn the rates and reliefs relevant to business transactions.
Key Takeaways
- SDLT rates on commercial property: 0% to £150,000; 2% to £250,000; 5% above £250,000
- Stamp Duty of 0.5% applies when buying shares in a UK company
- Group relief exempts intra-group property transfers within the same corporate group
- Deal structure (asset purchase vs share purchase) significantly affects the stamp duty position
SDLT on commercial property
Stamp Duty Land Tax is charged when a business purchases or takes a long lease on commercial property in England and Northern Ireland. The current SDLT rates for commercial freehold purchases: 0% on the first £150,000; 2% on the portion between £150,000 and £250,000; and 5% on the portion above £250,000. A £500,000 commercial property purchase incurs SDLT of £0 + £2,000 + £12,500 = £14,500. Scotland charges LBTT and Wales charges LTT — separate but broadly similar taxes.
SDLT on commercial leases
SDLT on leasehold commercial property is calculated differently — a 1% charge on the net present value of the rent over the lease term (above £150,000 NPV), plus the freehold rates on any premium. Leasehold SDLT is often calculated incorrectly — mistakes can result in HMRC seeking additional tax plus penalties years later. For any significant commercial lease, have the SDLT calculation reviewed by a specialist.
Stamp Duty on share purchases
When buying shares in a UK company (in an acquisition), Stamp Duty of 0.5% is charged on the consideration. Acquiring a company for £2 million incurs £10,000 of Stamp Duty, rounded up to the nearest £5, payable within 30 days of completion. AIM-listed shares bought through a qualifying platform are exempt — one reason AIM is popular with investors.
Group relief and other exemptions
Group relief exempts intra-group transfers of property where buyer and seller are in the same corporate group. Charities are exempt from SDLT on acquisitions for charitable purposes. Multiple dwellings relief can reduce the burden when buying multiple residential units (subject to recent changes). First-time buyers' relief applies to individuals only — companies buying residential property face higher SDLT rates than individuals.
Asset purchase vs share purchase
Deal structure significantly affects the stamp duty position. A share purchase incurs 0.5% Stamp Duty on total consideration. An asset purchase incurs SDLT only on the property element at commercial rates — other assets (goodwill, equipment, stock) do not trigger stamp duty. This distinction often influences deal structure negotiations — buyers may prefer asset purchases for the SDLT saving while sellers may prefer share purchases for CGT reasons.