Stamp Duty Land Tax

When dealing with agricultural tenancies SDLT – Stamp Duty Land Tax can be a complex issue. On completion in England of a farm business tenancy – FBT – it’s important to establish whether an SDLT return needs to be submitted, whether it is payable and if so, how much.

For a fixed term FBT, the same rules apply as for any other lease – SDLT will be payable if the Net Present Value of the FBT exceeds £150,000.00 – the non-residential Stamp Duty threshold. It’s based on a calculation of any premium payable under the lease plus the value of the rent over the term of the lease.

If an FBT contains residential property, a farmhouse or cottages, as well as agricultural land, non-residential rates should still apply as the transaction will fall into ‘mixed use’ as it covers residential and non-residential elements.

For periodic tenancies any additional tax which may need to be paid under such a tenancy, if it rolls over beyond its initial term, does not need to be paid until the very end of tenancy – an extra tax. When the tenancy eventually comes to an end this may give rise to a significant amount in SDLT.

Think carefully when an annual periodic FBT is proposed or where a fixed term FBT is intended to roll over into a statutory annual periodic FBT at the end of the fixed term and that tenancy is anticipated to last a number of years.

As tenants, you will need to work out at what stage an SDLT return will be required and when the SDLT threshold is likely to be reached. One option is for the parties to consider starting the clock again with a surrender and re-grant of the FBT.