When you are running your everyday business activities through a limited company in the UK, you might ask, ‘Do limited companies pay stamp duty?’ People are often inclined towards the structure of a limited company because purchasing property through a limited company comes with a range of benefits. This included capital gains allowance and other tax reliefs in this regard. However, it is still an important task to understand what is the implications of stamp duty in this regard. Especially when you are acquiring the properties for the corporations in the UK market. We have designed this comprehensive blog to explore the facts regarding the fundamentals of stamp duty on limited companies. Continue reading to gather more information on it.
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Do Limited Companies Pay Stamp Duty?
We all know that stamp duty land tax is imposed by HMRC in the UK. This applies to every individual purchase, property or land in the premises of the UK. The question that arises here is, ‘Do limited companies pay stamp duty?’ Well, it applies to non-natural entities like limited companies and individuals who purchase land. Moreover, it has been observed in most cases that the higher rate of stamp duty land tax is implemented in certain business circumstances. It is when;
- the interest accrued is not subject to a lease with more than 21 years remaining.
- the property value is more than the amount £40,000.
Moreover, the rates of stamp duty land tax depend on the value of the land or property.
How Much Stamp Duty Do Limited Companies Pay?
The stamp duty surcharge paid by the limited companies in the UK is 5% usually. This is applicable while a property is being purchased for rental income and this surcharge is paid on top of the standard stamp duty rate in case of residential property purchases. If the property price is between £0 to £250,000, the standard stamp duty rate will be 0% and the Limited Company Stamp Duty rate will be 5%. If the property price is between £250,001 to £925,000, the standard stamp duty rate will be 5% and the Limited Company Stamp Duty rate will be 10%. In case of being between the range of £925,001 to £1.5m, rates will be 10% and 15% accordingly. And finally, in the case of £1.5m+, the rates will be 12% and 17%.
Strategies to Reduce SDLT Liability
Companies in the UK are incentivised by HMRC the relief offered. This aim is to engage a specific type of business in the market. So the standards charged in such situations are usually off. However, it is strictly to be noted that the qualifying conditions must be met to gain the benefits of relief. Two such considerations where HMRC will offer a 17% relief to the companies in the UK include the following.
1- Property Development Trade
Sometimes the limited company requires a property for the sake of business re-development, and subsequent resale development, this is part of the property development process in the UK. This situation can also be eligible to get the relief from regular rates to a certain limit. However, any additional dwellings will be charged at SDLT higher rates. Moreover, the Property development trade also includes the purchasing activities regarding a certain property. There can be a range of conditions in which a company can be eligible to get relief from SDLT. Remember every business situation is unique and it depends on the circumstances whether you are eligible or not.
2- Property Rental Business
When a company in the UK acquires chargeable interest solely for the fort he sake of the purpose of earning the rental income from the property, it becomes part of the rental business that qualifies in this regard. In such eligible situations, the standard charges of SDLT are not implemented, however, you will have to meet the conditions and the criteria. The conditions to qualify for the relief include:
- The business in the UK is engaged in property rental business activity only.
- The business in this regard is operated on a commercial basis and only aims to make a profit.
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The Bottom Line
In conclusion, it is crucial to develop an understanding of the nuances regarding the query ‘Do limited companies pay stamp duty in the UK?’ Companies in the UK will be capable of making informed decisions if they are aware of the applicable SDLT rates, and available reliefs by HMRC in this regard. This information regarding exemptions, reliefs and applicable rates will eventually help to optimise their tax position and minimise the liability of SDLT in the UK. In case of need professional help, you can get in touch with our tax professional and we would love to be at your service. Getting started with us is simple, all you have to do is to reach out to us through a call or via email. You can also request a callback or request to get an instant quote in this regard.
Reach out to our intelligent and clever-minded guys to get the answer to your queries in the UK, we will get to your answers quickly. We will help to decide how to deal with your tax implications.
Disclaimer: The general information provided in this blog about do limited companies pay stamp duty includes text and graphics. It does not intend to disregard any of the professional advice in the future as well.
