UK Stamp Duty Land Tax on rental properties

1 MOBILITYINSIGHTSSepTeMBer 2012UK Stamp Duty land Tax on rental properties This Mobility Insights provides information on the requirement to pay Stamp Duty land Tax on selected rental properties in the in rented accommodation in the UK, that pay substantial annual rental amounts, may be required to pay Stamp Duty land Tax (SDLT). Tenants are responsible for assessing their liability for SDLT and for submitting the appropriate forms and payment to HM revenue and Customs (HMrC). It has been found that many tenants are unaware of this legal obligation, which if not complied with, may result in the tenant being fined.

2 Applicable submissions to HMrC must be received by HMrC within 30 days from the start of the tenancy or renewal term. Fines for late payment begin at 100 and if payment has not been made after 93 days, fines can increase to 200. Once the SDLT has been paid, should the tenant terminate the lease early, a tax refund is not possible. Below is a breakdown of the SDLT rates:C a l c u l a t i n g S D LT f o r a L e a s e The method for calculating SDLT for a lease is based on the net present value and whether the cumulative rent from the commencement date, currently exceeds 125,000. The net present value should be re-calculated on an annual basis to ensure the tenant is not required to pay SDLT at the outset or at any time during the term.

3 Should the value of the rent be more than 125,000, the tenant is liable to pay SDLT. The tax is calculated at a flat rate of 1% on the amount of the net present value that exceeds the SDLT threshold. For example, if the weekly rent is 2,500, then rent for the year is 130,000 and the amount of rent over the threshold is 5,000. As such the 1% SDLT rate equates to 50. RenewalsShould a tenant elect to renew/extend a lease for a further year, additional SDLT may be due at the time of renewal. A fixed term one year lease may fall under 125,000, but when the tenant renews the lease, the possible annual rent increase may mean the SDLT threshold is exceeded.

4 A new SDLT calculation is required each time a lease is varied . This occurs when the renewal relating to a lease is put in writing (a rent increase alone will not mean that the lease has been varied). Tenants should calculate whether they need to pay SDLT each time their lease is varied, based on the new rental amount. Should the tenant remain in the property, but does not sign a new lease, whether because the original lease had an option to extend the term or otherwise, this is known as a growing lease and the calculation for SDLT will need to be carried out at the start of each calendar to Calculate SDLTA ssignees can visit the HMrC website and use the Stamp Duty land Tax calculator to help work out how much SDLT is required: (click Start Again at the bottom of the page).

5 As tax law is a specialist area, we recommend you consult your tax adviser for further InformationHM revenue & Customs - - #2pAGe 1 OF 1 Information from Cartus to keep you informed on news that may impact your relocation Amount on Residential PropertiesUK SDLT rate 0 - 125,000 Zero 125,000 - 250,0001% of value that exceeds 125, 2012 Cartus Limited. All rights reserved. The information in this Mobility Insights publication is provided in good faith based on information currently available and is therefore subject to change. However it is not intended to provide specific advice or guidance or take the place of either written law or regulations.

6 Cartus accepts no liability for the accuracy, completeness or usefulness of the data and information contained herein or for any loss or damage arising in contract, tort or otherwise in reliance of the data contained or omitted from this Mobility Insights publication or from any action or decision taken as a for every move you further information on this or any other aspect of your international assignment programme, please do not hesitate to contact your Cartus representative or email road, Blagrove Swindon, Wiltshire SN5 8rS UK