Direct tax treatment of leases—assignments, surrenders and variations
Produced in partnership with Charles Goddard of Rosetta Tax
Direct tax treatment of leases—assignments, surrenders and variations

The following Tax guidance note Produced in partnership with Charles Goddard of Rosetta Tax provides comprehensive and up to date legal information covering:

  • Direct tax treatment of leases—assignments, surrenders and variations
  • Lease surrenders
  • Surrender payments
  • Reverse surrender payments
  • Lease assignments—premium paid by incoming tenant
  • Lease assignments—reverse premium paid by outgoing tenant
  • Lease variations and waivers
  • CGT reliefs

The direct tax treatment of landlords and tenants in relation to the grant of leases is considered in Practice Note: Direct tax treatment of leases—grant of a lease. This Practice Note considers the direct tax treatment of landlords and tenants in other transactions in relation to leases, principally assignments, surrenders and variations of existing leases.

The VAT and stamp duty land tax (SDLT) treatment of these transactions is also of critical importance in determining the overall tax treatment of the parties, for which, see Practice Notes:

  1. VAT issues for new and ongoing leases

  2. VAT issues for lease assignments and terminations

  3. SDLT chargeable consideration—leases, and

  4. SDLT—common lease transactions

As with the treatment of landlords and tenants in relation to the grant of leases, the tax treatment of transactions affecting existing leases depends on a number of factors including the tax status of the parties, the term of the lease and the purpose for which the transaction is entered into.

The legal mechanics relating to property, and specifically transactions involving leases, differ in some respects in the separate jurisdictions which make up the UK. This Practice Note is prepared by reference to English property law.

In this Practice Note, CGT is used to refer to both capital gains tax and corporation tax on chargeable gains.

Lease surrenders

Without action by either landlord or tenant, a lease