Stamp duty land tax and leases

Produced by Tolley in association with Grant Thornton's stamp taxes team

The following Corporation Tax guidance note Produced by Tolley in association with Grant Thornton's stamp taxes team provides comprehensive and up to date tax information covering:

  • Stamp duty land tax and leases
  • Taxation of lease premium and lease rentals
  • Special rules concerning lease rentals
  • Other special rules affecting leases
  • Leases for an indefinite term
  • Tenants remaining in occupation after end of fixed lease term
  • Variations
  • Overlap relief
  • Reverse premiums / surrenders
  • Issues on assignments
  • More...

Stamp duty land tax and leases

Taxation of lease premium and lease rentals

SDLT is charged on the grant of a new lease and other transactions treated as such (including lease variations to increase rent).

It is chargeable on any lease premium and also on the net present value (NPV) of any lease rentals payable (provided this is more than a nominal amount of rent). For SDLT purposes, ‘premium’ is defined as chargeable consideration other than rent (see FA 2003, Sch 5, para 9) and tax is charged on the premium based on the rates set out in FA 2003, s 55 (which is similar to the rates applicable to purchases of freehold interests).

From 1 April 2016, the residential rates on premiums are now overlaid by an additional 3% higher rate for purchases of additional dwellings by individuals (or generally to dwellings purchased by companies).

For further information on the specific residential and non-residential rates that apply to the lease premium and the NPV of rental payments, see the Stamp duty land tax ― basic rules guidance note.

Special rules concerning lease rentals

Special rules apply where the lease rentals, or part of the lease rentals, are variable, contingent, uncertain or unascertained at the date of grant:

  1. uncertain or unascertained rentals within the first five years of the lease term (eg where rentals are subject to a review or are based on turnover) require a reasonable estimate to be made up front

  2. contingent rental payments within the first five years are assumed to be payable

  3. an adjustment mechanism is provided which requires or permits recalculation of the tax payable after the five-year period has elapsed or the position has been determined

  4. the amounts taken into account for years after the first five years are deemed amounts, based on the highest rental for a 12-month period (as explained above)

  5. following changes made in FA 2013 (explained below) further increases in rent after the first five years (other than those resulting from a

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