The last thing you need as you enter retirement is the shock of discovering that you might not have the income you’d assumed, thanks to unexpected tax bills.
Rules surrounding stamp duty land tax (SDLT) mean this could be the reality for many GPs when they come to sell their medical practice.
According to the British Medical Association, SDLT is likely to affect increasing numbers of GP practices in the future, as more occupy leasehold properties and property prices vary.
However, the way the tax applies to partnerships is a tricky area, and many GPs may be unaware they could be liable for significant tax bills.
As a broad introduction to the topic, we’ve covered some general points about SDLT in this blog, but it’s always best to seek professional advice before making any tax-planning decisions. After all, everybody’s situation is different.
What is SDLT?
SDLT is charged on land and property transactions over a certain value in England and Northern Ireland.
You may need to pay it if you buy a property, or if a property is transferred to you.
How are partnerships affected?
This is where things get complicated.
While transfers within partnerships are often exempt from SDLT, changes to partnership arrangements can sometimes trigger a liability.
Whether or not this is the case comes down to complex legal details regarding different types of partnership, and the specific types of ownership rights partners have.
What are the rates?
If you are liable to pay SDLT, you’ll need to complete a land transaction return and submit it to HMRC, before paying the tax due.
The following rates apply to sales and transfers of non-residential properties:
|Property or lease premium or transfer value||SDLT rate|
|Less than £150,000||0%|
|£150,001 – £250,000||2%|
When you buy a new non-residential leasehold you pay SDLT on both the purchase price of the lease, using the rates above, and the value of the annual rent you pay.
These are calculated separately then added together.
|Net present value of rent||SDLT rate|
|£0 to £150,000||Zero|
|The portion from £150,001 to £5,000,000||1%|
|The portion above £5,000,000||2%|
Other rules apply in Scotland and Wales, so contact us for more information on these areas.
Practices within certain public bodies can claim relief from SDLT. These public bodies include:
- NHS Commissioning Board
- clinical commissioning groups
- NHS foundation trusts
- Local Health Boards
- NHS trusts and Health and Social Services trusts
If you’re nearing retirement and planning on selling your practice, it’s essential to consider SDLT and other taxes that might apply to you.
We provide specialist tax services for medical professionals and can help you plan for a smooth transition to retirement.