Following the Government’s launch of the Homes for Ukraine Scheme on 14th March, many commercial property owners have been eager to help but have been unsure as to the financial implications involved. This article outlines property business relief and how this is impacted by the Homes for Ukraine Scheme.
Property Business Relief
Many commercial property owners and developers are aware of the 3% surcharge of Stamp Duty Land Tax (“SDLT”) payable on the purchase of residential dwellings by “non-natural entities” (i.e., companies, LLPs). However, it is important to also be aware that SDLT is charged at 15% on acquisitions of residential dwellings costing more than £500,000.00 by non-natural entities unless certain reliefs apply.
Property Business Relief is available in the following circumstances:
- Exploitation as a source of rent or other receipts (other than excluded rents) in the course of a qualifying property rental business.
- Use as business premises for the purposes of a qualifying property rental business (other than one that gives rise to income consisting wholly or mainly of excluded rents). A qualifying property rental business is defined in s. 204 Corporation Tax Act 2009 and includes a scenario in which property is developed following its purchase provided that the non-natural person acquires and develops the property exclusively for exploitation as a source of rent or other receipts (other than excluded rents) in the course of a qualifying property rental business. This is provided that reasonable steps are taken to ensure that it is used for that purpose e.g., appointing letting agents, buying furniture or redecorating.
- Use for the purposes of a trade that is run on a commercial basis and with a view to profit.
- Development (or redevelopment) and either:
- resale in the course of a property development trade (which consists of, or includes, buying and developing or redeveloping residential or non-residential property for resale on a commercial basis for profit); or
- exploitation falling within one of the above three bullet points.
- Resale in the course of a property development trade if the interest is acquired (in the course of a property development trade) from a person that acquired a new dwelling as part of a qualifying exchange.
- Resale in the course of a property trading business (where the property is stock of the business).
If any of these reliefs apply, the standard residential rate of SDLT is payable on the purchase plus the 3% surcharge as is standard when purchasing dwellings through non-natural entities.
It important to note that the reliefs are subject to clawback in certain situations. Clawback applies if, within three years of completion, the Property is no longer used for the purpose for which relief was available, or the Property is used personally or for family (or connected person) occupation – this would result in the relief being withdrawn and the 15% rate becoming immediately payable on the purchase.
How is it impacted by the Homes for Ukraine Scheme?
Good news! Understandably, the Government is keen to avoid penalising anyone who may be willing to offer their properties for housing for any Ukrainian refugees who may need it. Therefore, if relief from the 15% rate of SDLT was available to any entity prior to any residential dwellings owned by it being occupied by refugees under the scheme, such reliefs will continue to be available provided that: -
- the dwelling is occupied by refugees under the Scheme, or
- the purchaser is taking steps without undue delay to use the dwelling as part of the Scheme.
Full details of the scheme can be found using the following link: ‘Homes for Ukraine’ scheme launches - GOV.UK (www.gov.uk).
If you wish to discuss any of the points raised in this article or require legal assistance with your property matters, our solicitors at Clifton Ingram can help. We regularly advise clients across the South East on all areas of Commercial Property Law. Speak to one of our team today to see how we can help on 0808 164 1510 or email email@example.com.