Its a common situation,
Developer enters into a contract for the purchase of a site from a large supermarket chain.
Developer is to pay £10 million to the seller, construct a new store and grant a 999 year lease back of the new store to the supermarket at a peppercorn rent. The contract is conditional upon planning.
Developer, budgets for SDLT on £10 million.
Developer's solicitor advises that as a result of the leaseback to the supermarket this is now an exchange and SDLT is chargeable on open market value on the date that the contract goes unconditional. The open market value of the land with the benefit of the planning (achieved at the cost of the developer) is now £15 million.
Ouch that means at least an extra £200,000 of SDLT*
Could this have been avoided? - Yes!
Using a fancy scheme that messes up an already difficult set of negotiations? No!
A simple piece of drafting can save the additional £200,000.
If you are interested in how something similar to the old build licence route could save all the SDLT then I can help with that too - but obviously this doesn't always work commercially or for the seller's tax position so it needs to be considered early.
You can contact me at sharron.carle@keystonelaw.co.uk
HMRC are still deciding at the moment whether there is VAT on market value calculations. Their manual says not but this is under review.
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