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Commercial Property


The third instalment of the Business Department quarterly email update focuses on Commercial Property, and in particular the areas of Stamp Duty Land Tax in Wales and Heads of Terms.

Stamp Duty Land Tax in Wales

In September, the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Bill was introduced into the Welsh Assembly. If passed, the Bill will allow the Welsh Assembly to levy its own tax on land transactions in Wales and it will replace Stamp Duty Land Tax. This means that Wales may well have different rates and rules to England and it could prove an important consideration to prospective property buyers.

The Bill is available to view on the Welsh Assembly website (http://senedd.assembly.wales/mgIssueHistoryHome.aspx?IId=15873). There is a notable difference in the tax treatment of transactions involving a seller in their private capacity where the buyer is a company “connected” to them (for example, a company where the seller is a major shareholder). For these transactions, the proposed chargeable tax will be the greater of the consideration paid by the company to the seller or the market value of the subject-matter of the transaction as at the effective date of the transaction. At present, Stamp Duty Land Tax is only charged on the chargeable consideration, i.e. the money or money’s worth changing hands between the company and the seller. The consequence being that a company may have to pay more tax for the land transaction. The Bill does provide some limited exceptions for this. There are also a number of reliefs available so there may be scope to mitigate any tax reliefs.

The Bill is expected to come into force in Spring/Summer 2017 and must be a consideration when structuring any property transactions for a business. The rates and final details of how the tax is to be applied are likely to be confirmed in the weeks preceding the implementation of the Bill, assuming that it is passed.

Heads of Terms

Heads of terms (HoTs) are an important part of a commercial property agreement. They often mark the start of legal negotiations but you may wish to speak with your solicitor before the heads of terms are agreed.

The HoTs should record the basis of what has been established for the agreement to proceed; for instance the property being sold/ let, the price, the annual rent, repairing obligations and fixtures and fittings. Though generally not viewed as legally binding, there is still a danger that by agreeing to the terms the parties are creating a legally binding contract. For this reason it is important that the HoTs should be expressed as “subject to agreement, contract or lease” or as “draft” heads of terms. Perhaps the main benefit of the HoTs is that by providing the basis for the agreement, it can save a lot of time because any deal-making or deal-breaking terms have already been considered. If you are negotiating the heads of terms of a transaction but are unsure about some of the details, then it is probably best to take legal advice at that stage.

Therefore, whether you are a landlord, tenant, buyer, seller or even an agent, the HoTs should always be carefully considered. If caution is thrown to the wind, HoTs can leave you feeling a little hot under the collar!

If you need further advice on the topics within this email or any other relating to your business, call 01978 295861 or email business@allingtonhughes.co.uk, both of these methods will connect you direct to the head of the business department, Melissa Bramwell.

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The professional rules relating to solicitors' firms, including the Code of Conduct can be accessed on the website of the Solicitors Regulation Authority at www.sra.org.uk

Allington Hughes Law is a trading name of Allington Hughes Limited. Registered office is 10 Grosvenor Road, Wrexham LL11 1SD

Registered in England and Wales. Company registration number 07831162.

Authorised and regulated by the Solicitors Regulation Authority number 597867

V.A.T. registration number 166 8213 93