UK: Stamp Duty on Land and Buildings in Disadvantaged Areas

Last Updated: 17 March 2003

By Peter Steiner and Trefor John

The Government is finalising implementation of the second phase of a stamp duty exemption for the transfer of land in the most disadvantaged areas in the UK. Here we summarise the stamp duty exemption, the first phase of which is already in place, which aims to promote investment and stimulate regeneration in deprived areas.

Stamp duty and land and buildings

Stamp duty is payable each time land or buildings are transferred or a lease is granted. To register a sale or lease with HM Land Registry, stamp duty must have been paid.

The level of stamp duty due normally depends on the amount of consideration given for the transfer of land or, for a lease, on the value of the premium and rent reserved.

The rates of stamp duty currently payable on transfers of land range from 1% where the consideration exceeds £60,000 up to £250,000 (with the appropriate certificate of value); 3% from £250,000 to £500,000 (with the appropriate certificate of value); and 4% in excess of £500,000. Some documents (such as transfers of property "not on sale") are charged only with £5 fixed duty.

Disadvantaged areas - stamp duty exemption

On 30 November 2001, the Government introduced the first phase of a stamp duty exemption for property transactions in designated disadvantaged areas. The exemption applies to all transfers and leases of land located in those areas which were executed on or after 30 November 2001, provided the consideration does not exceed £150,000.

When do the disadvantaged areas rules apply?

The stamp duty exemption applies to the sale of land in areas designated as the most deprived in the United Kingdom. A list of the designated areas is available from the Inland Revenue website at In total there are nearly 2,000 qualifying areas.

The exemption applies to both commercial and residential land.

The exemption only currently applies to properties with a sale or lease premium value of £150,000 or less. It only applies to a premium paid for a lease; rent continues to incur normal stamp duty.

How is the claim for exemption made?

The exemption is obtained by certifying that the document falls within the disadvantaged areas legislation. A certificate of value of the effect that the transfer or lease does not exceed £250,000 must also be included in the transfer/lease document 1 . The exemption does not apply if the document forms part of a larger transaction or series of transactions in excess of £150,000. The document should be submitted with the relevant certification (and with an indication of the postcode) to the Inland Revenue for adjudication.

Disadvantaged areas exemption – second phase

A second phase of the exemption has been announced by the Government.

The second phase includes proposals to abolish the existing cap of £150,000 in relation to property put to commercial use 2 .

There are also proposals to abolish the cap in relation to the purchase together of six or more separate dwellings - this is intended to benefit large commercial investors who are investing in disadvantaged areas.

It is also proposed that the stamp duty exemption (which currently does not apply to rents under leases but does apply to lease premiums) will extend to stamp duty levied on the average annual rent of newly granted leases. Under the proposals, there will be stamp duty relief where the average annual rent does not exceed 10% of the relevant cap, which means that for residential properties with a cap of £150,000, the relief on new leases will apply where the average annual rent does not exceed £15,000.

The European Commission announced in January 2003 that this second phase is in line with Community objectives on economic and social cohesion and sustainable development. This EC approval has given the second phase the ‘green light’ and the Government is expected to implement the proposed changes in the next Budget, due on 9 April 2003.


1 The £250,000 certificate of value (normally used to evidence that the 1% rather than 3% band of stamp duty applies) should be used notwithstanding the exemption limit is £150,000.

2 Commercial use includes, for example, use as a student hall of residence, care home or hospital.

This is a brief summary only of the current position.

Copyright © 2003 Mayer, Brown, Rowe & Maw. This Mayer, Brown, Rowe & Maw publication provides information and comments on legal issues and developments of interest to or clients and friends. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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