The chancellor has announced commercial property taxes will be reformed along the lines of residential stamp duty land tax.
As part of his Budget speech, George Osborne stated from midnight tonight (16 March), stamp duty on commercial property will be:
• 0 per cent up to £150,000
• 2 per cent on next £100,000
• 5 per cent above £250,000
He commented that these commercial stamp duty changes would theoretically enable the purchase of a typical pub in the Midlands for £5,000 less in tax - down from £8,000 to £3,000.
The changes will come into effect from midnight tonight and should raise £500m a year for the public purse.
Some small firms will pay 90 per cent less, or be unaffected, although 9 per cent of firms will pay more, the chancellor claimed.
Mr Osborne also re-stated the residential stamp duty reforms will come into force in April, confirming “large investors” will be covered, referring to those who thought more than 15 properties in a portfolio would protect them from the changes.
Receipts from the additional stamp duty are to be diverted into community housing in south west, he added.
Mark Fielden, a tax partner at Kingston Smith, said: “Following the introduction of graduated rates of stamp duty for residential properties, the same approach has now been adopted for commercial properties,” adding this was “welcome news for small businesses looking to invest in new premises”.
Claire Trott, head of pensions technical at Talbot & Muir, commented that the changes to commercial property stamp duty are welcome to self-invested pension members, who were already seeing an increase in interest in commercial property within schemes because of the lack of stability on the stock market.
She said: “Investors like the fact that it is a physical asset and this reduction will mean it is more affordable for those wanting to invest in a time when contributions are being ever limited by the annual allowance and lifetime allowance.
“A property valued at £260,000 would pay £7,800 today but this will drop to £2,500 from midnight”