In this blog I will summarise the SDLT rules that apply when entering into a lease of commercial property and look at some of the rules that have effect during the life of the lease.
Stamp duty land tax (SDLT) replaced stamp duty on 1 December 2003. A tenant is liable to calculate and pay any SDLT due and deliver a land transaction return in the case of a ‘notifiable transaction’.
Many short and low value leases do not give rise to a liability to pay SDLT. For example on 22 September 2014 there would have been no SDLT to pay on the grant of a five year lease at a fixed rent of £12,000. Tenancies at will and licences fall outside the scope of SDLT but HMRC applies strict rules when deciding whether an arrangement is a lease for SDLT purposes.
An agreement for lease does not trigger a liability to pay SDLT but the grant of a lease which does not commence until a future date (a reversionary lease) does. There is, therefore, a timing advantage in using an agreement for lease. However, HMRC will treat an agreement as a notional lease if, during the life of the agreement, the parties behave as if the lease had been granted (by the tenant paying rent for example).
SDLT is calculated on ‘chargeable consideration’ (consideration is money or money’s worth). There are complicated rules for determining what is and is not chargeable consideration. Some brief examples:
Here are a few of the SDLT rules that may apply during the life of a lease:
As with other taxes there are a number of reliefs available in the SDLT regime. We can advise you on the SDLT implications of the lease you are proposing to enter into and we will help you limit your SDLT liability where possible.
*We are recommended for the following practice areas: Corporate and Commercial, Debt Recovery, Employment, Personal Injury: Claimant, Agriculture and Estates, Contentious Trusts and Probate, Family, Personal Tax, Trusts and Probate & Commercial Property.ServicesContact