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Stamp duty land tax and leasehold premises

Practices may not be aware that stamp duty land tax also applies to business leases. Bryn Morgan provides some advice.

SDLT may apply if a GP practice moves into a premises without a lease (Photograph: NTI)
SDLT may apply if a GP practice moves into a premises without a lease (Photograph: NTI)

Many GPs know that stamp duty land tax (SDLT) may have to be paid when buying a residential or business property, including practice premises.

However, you may not realise that if the practice moves to a leased building, SDLT may be due as it also applies to business leases. The amount of tax payable will depend on the level of rent payable and on the number of years the lease is for.

More often than not, there will be some SDLT due and the practice should submit a SDLT return to HM Revenue & Customs (HMRC).

Taking a lease
Regardless of any funding to cover the cost of SDLT available from your primary care organisation (PCO), the GP principals are personally liable for tax due under any lease they enter into.

The onus is on GPs to assess their own SDLT liabilities and meet filing deadlines. Failure to do this is likely to hit them in the pocket. It is unlikely any PCO (or future body responsible for rent reimbursement) would agree to fund backdated tax, penalties and/or interest.

The SDLT rules are complex and measures are in place to block avoidance of this tax that can easily catch out the unwary.

For instance, SDLT may be triggered simply as a result of a GP practice moving into premises without a lease. Many third party landlords are reluctant to allow tenants to move in without a formal lease.But informal arrangements are common with properties owned by NHS bodies, particularly in respect of GPs occupying PCO-owned premises.

Such arrangements can create a 'periodic tenancy' with yearly reporting obligations that GPs, who fail to take advice on the tax consequences of such a move, almost invariably miss.

Holding over leases
Another trap is that additional SDLT may become due if the practice is still occupying ('holding over') premises after the contractual end date of its lease. This triggers an obligation to inform HMRC and to continue doing so once a year for long as the holding over continues.

Finding out in advance
These are just a few examples of SDLT issues that should be reviewed whenever a GP practice considers leasing premises.

These issues, as well as penalties and other extra costs, can be avoided by taking legal advice before occupying premises for the first time and/or before an existing lease expires.

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