sdlt on commercial lease assignment

• SDLT Avoidance Schemes
• Stamp Duty Land Tax FAQs
• SDLT Planning
• Stamp Duty Refund
• Multiple Dwellings Relief
• Section 75A: SDLT Anti-avoidance
• SDLT Penalties and Appeals
• Stamp Duty on Commercial Properties
• SDLT on Divorce
• Stamp Duty for Non-UK Residents
• SDLT on Second homes
• Mixed Use Claims in SDLT
• Disguised Remuneration Loan Schemes
• Failed Tax Avoidance Schemes
• Mis-Sold Tax Avoidance Schemes
• Settlement Of Tax Avoidance Schemes
• Unexplained Wealth Orders
• GAAR Guidance
• Enabler Penalties
• GAAR Penalties
• GAAR Tax Arrangements
• Money Laundering
• Income Tax Fraud
• Code Of Practice 9
• Furlough Fraud
• Payroll fraud
• Proceeds of Crime Act
• Cryptocurrency Tax Investigations
• Bribery and Corruption Investigations
• Personal Tax Investigations Disputes
• Specialist Tax Investigations
• Tax Investigation Procedure
• HMRC Disputes
• Tax Related Commercial Litigation
• Corporate Criminal Tax Offences
• Cheating the Public Revenue
• Appeal a Tax Penalty
• Offshore Disclosure Facility / Voluntary Disclosures
• Tax Tribunal Representation 
• Business and Corporation Tax
• Stamp Duty Land Tax
• Direct Access
• Notable Cases
• Legal Articles
• Webinars & Events
• Publications
• Tax Avoidance Schemes
• Stamp Duty Land Tax Advisor
• SDLT Planning & Appeals
• SDLT on Second Homes
• GAAR Penalties and Enabler Penalties
• GAAR Enabler Penalties
• Financial Crime
• Tax Investigations
• Civil & Criminal Tax Investigations
• Private Clients
• Webinar & Events

Do You Pay Stamp Duty on a Commercial Lease?

SDLT on commercial leases can be very complex. Many tenants are unaware that Stamp Duty Land tax is payable on commercial leases – and may be hit with a penalty, as well as the full amount owed with interest if they fail to pay the tax on time.

Due to the complexity of the application of SDLT on commercial leases, there are also many circumstances where tenants mistakenly overpay the tax. If this is the case, it is possible to reclaim overpaid SDLT from HMRC, although this process can also be complicated.

If you are negotiating a commercial lease, seeking legitimate savings on SDLT or are attempting to reclaim overpaid tax, using an experienced Stamp Duty Land Tax barrister is highly recommended.

Patrick Cannon has over 35 years of experience working as an SDLT lawyer – first as a solicitor and latterly as a barrister. His in-depth knowledge of the intricacies of this field of tax law makes him the ideal choice to manage, advise and represent private and corporate clients in all aspects of SDLT on commercial leases. For more information, contact Patrick Cannon here .

Do I have to pay stamp duty on a commercial lease?

If you are a tenant of a commercial property, it is your responsibility to calculate and pay SDLT on the lease on time. Landlords bear no responsibility for SDLT on the lease.

For commercial tenants, SDLT may be payable on any of the following elements of your commercial lease: • Grant • Assignment • Variation • Surrender

SDLT is not payable on all commercial leases, however – and for this reason, it is highly recommended that you instruct a specialist tax lawyer or accountant to review your liability for the tax.

How to calculate stamp duty on a commercial lease?

As mentioned, calculating Stamp Duty on a commercial lease is complex, and while it is possible to use an online calculator, the calculators do not allow for all the complexities that may arise and so it is advisable to consult a tax lawyer or accountant who is well versed in handling commercial SDLT.

The SDLT rate is based on any lease premium paid by the tenant and on the rent due under the terms of the lease (including VAT if applicable).

The amount of ‘rent due’ is based on the first 5 years of rent payments. If the lease is longer than 5 years, the ‘rent due’ is based on the highest amount paid over a 12-month period during the first 5 years.

Once the length of the lease is factored in, the Net Present Value (NPV) of the lease can be calculated, and the amount of SDLT owed is based on this figure.

SDLT can also be applied to certain other payments made under the terms of a lease, and also to ‘chargeable considerations’, such as a commercial tenant’s obligations to carry out work or services on a rented property.

When Does Stamp Duty Land Tax Need To Be Paid?

SDLT needs to be paid within 14 days of the ‘effective date’ of the transaction. This could be the date of completion of the transaction, the moving-in date, or when the main part (‘substantial performance’) of the transaction has taken place.

Frequently Asked Questions

Do you have to pay stamp duty on a commercial lease extension.

Lease extensions may give rise to additional SDLT, however, neither the surrender of the old lease nor the grant of the new lease are regarded as ‘chargeable consideration’. It is always worth confirming your liability with a tax barrister or solicitor before you commit to a lease extension and to ensure that you are not missing the deadline for SDLT payment.

Is Stamp Duty the Same for leases on Residential, Mixed and Commercial Properties?

No – SDLT rates for residential vs Commercial property leases are different and the rates for residential leases can be found here.

SDLT rates for non-residential leases are as follows:

Are There Exemptions on Paying SDLT for a Commercial Lease?

Yes – you are exempt from paying SDLT if you are granted a commercial property lease of more than seven years, while the premium is under £40,000 with the annual rent of less than £1,000. There are other exemptions for SDLT on commercial leases, including leasebacks and extensions.

How Patrick Cannon Can Help?

Patrick Cannon is a highly experienced tax barrister and leading expert on SDLT . With his in-depth knowledge of the nuances of this complex area of tax law, Patrick is able to advise on all aspects of commercial lease SDLT, as well as manage all correspondence with HMRC, including claiming refunds for overpaid SDLT and defending clients in HMRC investigations and litigation.

For more information or to instruct Patrick Cannon directly, contact him here .

Last Updated: 18th January 2023

Get In Touch

For professional and insurance reasons Patrick is unable to offer any advice until he has been formally instructed.

Your First Name* Your Last Name* Your email* Your phone number* Enquiry Sign up to our mailing list, webinar invites and more? Yes please. Have you read our T&Cs ? I understand that Patrick does not offer free advice for professional and insurance reasons.

Your data will only be used within Patrick Cannon for processing you enquiry.

Related Articles

Capital gains tax and whisky investments: too good to be true.

The blog aims to clarify the misconceptions surrounding capital gains tax on whisky investments and their supposed tax-free status, particularly regarding capital gains tax (CGT) exemptions….

Spring Budget Stamp Duty Review

In the 2024 Spring Budget announcements we find an example of Cannon’s First Law of Stamp Duty which is that a relief or exemption from tax…

Stamp Duty On Granny Annexes

Introduction To Stamp Duty On Granny Annexes  It is important to take stamp duty advice on the purchase of a property with a granny annexe so…

For Monthly Articles Like This, Sign Up To Our Newsletter

+44 020 4539 6731

Click here to arrange a Zoom

First Name:

Your Email:

Your Telephone:

Your Enquiry:

Sign up to our mailing list, webinar invites and more? Yes please. Have you read our T&Cs ? I understand that Patrick does not offer free advice for professional and insurance reasons.

• Business Legal Services
• Banking & Finance Law
• Business Disputes
• Business Immigration Law
• Commercial Law
• Commercial Property Law
• Construction Law
• Corporate Law
• Data Protection & Privacy Law
• Employee Share Schemes
• Employment Law
• Financial Services Regulation
• Funding & Investment
• Insolvency & Corporate Recovery
• Intellectual Property
• IT & Commercial Technology Law
• Overview   
• Acquisition & Leveraged Debt   
• Asset Finance & Asset Based Lending   
• Construction & Development Finance   
• Debt Finance   
• Financial Services Regulation   
• Funding & Investment   
• Trade Finance   
• Alternative Dispute Resolution   
• Business Dispute Case Assessment   
• Commercial Contract Disputes   
• Commercial Property Disputes   
• Construction & Engineering Disputes   
• Defending Employment Tribunal claims   
• Shareholder Disputes   
• Intellectual Property Disputes   
• Litigation & Arbitration   
• Partnership Disputes   
• Professional Negligence Claims   
• Public Procurement Challenges   
• Agency Agreements   
• Commercial Contracts   
• Confidentiality & Non-Disclosure Agreements   
• Franchise Law   
• Intellectual Property in Commercial Contracts   
• Joint Venture Agreements   
• Sale & Distribution Agreements   
• Service Agreements   
• Subcontractor Agreements   
• Supply of Goods Agreements   
• Terms of Business   
• Commercial Leases   
• Corporate Transactions   
• Property Development   
• Property Finance   
• Sale and Purchase   
• Unregistered Land   
• Construction & Engineering Contracts   
• Banking & Finance Law   
• B Corp Conversion Lawyers   
• Cap Table Creation & Management   
• Company Secretarial Services   
• Corporate Governance   
• Corporate Restructuring   
• Employee Share Schemes   
• Exits & Disposals   
• LLP Agreements   
• Mergers & Acquisitions (M&A)   
• Share Capital   
• Cybersecurity   
• Data Breaches & Incident Management   
• Data Governance   
• Data Protection Health Check   
• Data Protection Impact Assessments   
• GDPR Compliance   
• GDPR Training   
• Outsourced DPO   
• Support for DPOs   
• EMI Share Options   
• Employee Ownership Trusts (EOTs)   
• Flowering Shares   
• Growth Shares   
• Hurdle Shares   
• Phantom Share Schemes   
• Non Tax-Advantaged Share Plans   
• Absence & Sickness Management   
• Discipline & Grievance Procedures   
• Discrimination Claims   
• Employment Contracts   
• Employment Status and IR35   
• HR & Employment Law Training   
• HR Compliance Audit   
• Redundancies & Business Reorganisations   
• Senior Employee Exits   
• Settlement Agreements   
• Transactions & TUPE   
• Consumer Credit & Hire   
• Payment Services   
• Regulated Banking & Finance Activities   
• Crowdfunding   
• EIS & SEIS   
• Investment Agreements   
• Pre-Seed & Seed Funding   
• Private Equity   
• Series A, B & C Funding   
• Term Sheets   
• Venture Capital   
• Director Disqualification Solicitors   
• Copyright Lawyers   
• Design Rights   
• Intellectual Property Audits   
• Intellectual Property Licensing   
• Intellectual Property Strategy   
• Online Brand Protection   
• Patent Litigation   
• Patent Protection & Management   
• Trade Marks   
• Utility Models   
• Cloud Service Agreements   
• SaaS Agreements   
• Software Licence Agreements   
• The big idea   
• Getting started   
• Getting on with it   
• Scaling up   
• Looking to exit   
• Creative Industries
• Energy, Utilities & Environment
• Life Sciences
• Manufacturing & Engineering
• Public Sector
• Retail & Luxury Brands
• Enterprise Plan
• On-Demand Plan
• Fixed Fee Products

• Meet Our Team
• Press & Media
• What Our Clients Say
• Company News
• Client Stories
• Events & Webinars
• Podcasts & Videos
• Thoughts & Opinions
• Knowledge Hub
• Make An Enquiry
• Request A Call Back
• Birmingham   
• Cambridge   
• London   
• Manchester   
• Oxford   
• Sheffield   
• Southampton   

Knowledge Hub for Growth

Commercial property stamp duty land tax (sdlt).

If you are thinking of buying or leasing commercial premises, understanding your Stamp Duty Land Tax (SDLT) obligations is crucial. SDLT is a significant, complex and sometimes overlooked aspect of property transactions. It is important that you accurately determine and settle any SDLT liability for your specific commercial property transaction to avoid penalties.

In this article, our commercial property solicitors will consider how SDLT applies to common transactions in commercial property such as purchases, leases, assignments and surrenders. We will also address the process and formalities behind payment, and briefly explore some complex areas.

It is worth mentioning at the outset that any rules or rates are subject to changes over time.

What is Stamp Duty Land Tax?

SDLT is a mandatory self-assessment tax imposed on the transfer of land or property. In the case of commercial property, SDLT is payable in respect of land or buildings used for non-residential purposes, such as offices, shops, warehouses, and industrial premises. The tax is progressive in nature, meaning that higher rates are applied to the portion of the property price that falls within each threshold.  

Why do we need to pay it?

SDLT was introduced historically as a temporary measure to raise funds for war, however the government continued to levy the tax as a means of generating revenue. It is also used to regulate the property market.

What is the stamp duty threshold on a commercial property transaction?

The stamp duty threshold for commercial property transactions in the UK is currently £150,000.

Do you need to pay stamp duty on all commercial property transactions?

If the value of the transaction falls below the threshold, you do not have to pay SDLT. There are also certain transactions that are ‘exempt’ from SDLT including where:

• No money or other type of payment has changed hands (for eg gifts of land)
• The property has been left in a will
• The property has been transferred as a result of divorce or dissolution of a civil partnership
• A registered landlord has granted a certain type of lease

Exempt transactions are also non-notifiable, which means no land transaction return needs to be submitted to HMRC.

When is commercial stamp duty payable?

SDLT is triggered on the ‘effective date’ of the transaction, which is typically the day the contract completes, or the date the contract is ‘substantially performed’. The contract may be deemed as substantially performed if:

• 90% or more of the consideration due under the contract (normally the purchase price) is paid or provided before completion
• The buyer or incoming tenant (or connected persons) takes possession of the whole or substantially whole of the property in advance of completion (ie obtain the keys and is entitled to occupy the property). Possession also includes receipt of rent / profits from the property or a right to receive them
• If the effective date of your transaction takes place on or after 1 March 2019, SDLT must be paid within 14 days after the effective date. The 30-day deadline that existed prior to this is only preserved for very specific circumstances

Implications of SDLT when buying commercial property

It is important to factor SDLT when choosing a commercial property and arranging your finances in advance of a purchase. The type of purchase (freehold or leasehold), purchase price, annual rent and length of lease all impact the amount of SDLT you end up paying.

For leased premises, you should also be aware that SDLT may become payable again during the course of a lease as a result of rent reviews. If you remain in occupation of a premises after the contractual expiry of the lease, SDLT liability may be triggered for any 'holding over' period under the terms of the existing lease, and if the lease is renewed. The SDLT provisions for lease renewals and holding over periods are complex.

It is also worth noting that if you exercise a break clause in your lease for early exit, you will not be entitled to recover any monies paid in respect of the remainder of the term. It is therefore a good idea to get commercial property solicitors involved when negotiating and agreeing heads of terms so that you are aware of and can perhaps mitigate SDLT implications.

Factors that impact SDLT liability:

There are a number of factors that can impact your SDLT liability, including:

• Purchase price: different SDLT rates apply to different portions of the purchase price. Higher purchase prices will generally result in higher SDLT liabilities. The current rates are set out here .
• Property type: rates differ for freehold and leasehold properties
• Leasehold terms: the length of the lease, premium paid (if any) and rent payable under the lease can all impact the SDLT liability
• SDLT reliefs and exemption: there are a number of reliefs and exemptions that may be available to reduce SDLT liability depending on the transaction. This includes transfers between companies within the same group to facilitate corporate restructuring, properties purchased for charitable purposes, multiple dwellings purchased in a single transaction such as a portfolio of residential properties, certain property investment funds, and many more
• Linked transactions: if multiple transactions are related or linked, SDLT may be calculated based on the total value of those transactions combined. This can impact the overall SDLT liability
• Location: SDLT applies to properties located in England. In Wales, Land Transaction Tax (LTT) replaced SDLT in April 2018, while in Scotland Land and Buildings Transaction Tax has been in place since April 2015

SDLT considerations for commercial property leases

There are several SDLT considerations to keep in mind when purchasing a commercial lease, including:

• SDLT on lease premiums: SDLT may be payable on any premium paid for the grant of the lease for the portion that exceeds the threshold (£150,000). The SDLT due will be calculated on the same sliding scale/tier system as freehold commercial property purchases. For more information view the current commercial SDLT rates .
• SDLT on rent: in addition to lease premiums, SDLT may also be payable on any rental payments due under the lease. This is calculated based on the net present value (NPV) of the lease, a complicated formula which takes into account the expected rental payments (inclusive of VAT) over the term of the lease at present day prices. If the NPV exceeds the £150,000 threshold, SDLT is payable on a sliding scale
• Rent reviews and variations: in cases where the lease includes rent reviews or variations, SDLT may be payable on any increase in rent that occurs as a result. The additional SDLT is calculated based on the NPV of the increased rent over the remaining term of the lease
• Exemptions and reliefs: certain types of leases may be exempt from SDLT, such as:
• new or assigned leases of 7 years or more, provided the premium is less than £40,000 and annual rent less than £1,000
• new or assigned lease less than 7 years, provided the amount paid is less than the residential threshold or non-residential threshold of SDLT

There are also various SDLT reliefs that may apply to a particular transaction for eg: sales and leasebacks and transactions involving charities. You should consult your professional advisory team to understand the full range of reliefs available to avoid accounting for SDLT unnecessarily.

Lease duration and SDLT liability

The duration of the lease has a significant impact on SDLT liability. This is because working out the NPV involves calculating the total rent payable over the life of the lease, taking into account inflation. As such, a long lease even at a modest rent can attract SDLT liability, while the same goes for a short lease at a high rent. Generally speaking, the shorter the lease term and the lower the rent, the less SDLT liability due.

SDLT implications for lease assignments and surrenders

Commercial Lease Assignments:

If you take over an existing lease, SDLT is generally only payable on the lease premium (plus VAT), which refers to any lump sum payment made for the assignment. In most cases, the SDLT is worked out using the same thresholds and rates as a commercial property purchase.

Commercial Lease Surrenders:

If you and your landlord agree to terminate the lease before its original expiry date, SDLT may be applicable if there is a payment or other consideration provided by the landlord for the surrender. SDLT is calculated based on the amount or value of such consideration.

Complex arrangements

Various mitigation methods and reliefs exist to reduce or even eliminate SDLT on more complex transactions. We do not intend to cover all scenarios in detail in this note, however some common areas include:

• Sub-sale relief: this may be used if you enter into a contract to purchase (or lease) land but, before completion, you agree to sub-sell, assign or transfer your rights to a third party. The relief enables you, as the original buyer to reclaim any tax paid, so that SDLT is only paid by the end transferee who acquires the property or land
• Overlap relief: this is designed to alleviate double taxation on the same rent, most commonly encountered on the surrender and regrant of a lease over the same, or substantially the same premises. It works by reducing the rent payable in the overlap period by the rent that was taken into account in determining the SDLT on the grant of the old lease
• Partnership relief: SDLT reliefs and rules apply to properties transferred in and out of partnerships (including contributions by incoming or existing partners or connected persons, or distributions to), and transfers of partnership interest in property investment partnership (PiP)

What are the current commercial SDLT rates?

The SDLT rates for commercial property are currently:

• 0% on the portion up to £150,000
• 2% on the next £100,000 portion that falls between £150,001 and £250,000
• 5% on the remaining portion above £250,000

The rates and thresholds for leasehold properties, based on the NPV are currently:

• 1% on the portion from £150,001 to £5,000,000
• 2% on the portion above £5,000,000

Compliance and Filing Requirements

• SDLT filing obligations for commercial property transactions In most cases, the responsibility falls on the buyer to complete and file the return with HMRC, and calculate and pay any SDLT owed within the set deadlines.
• Time limits and penalties for late SDLT filings 1. Filing time limit: the purchaser must submit the SDLT return and pay any tax due within 14 days of the completion of the transaction or substantial performance of the contract. The completion date is usually the date when ownership of the property is transferred or the date when the lease is granted. Note that the transaction may still be notifiable to HMRC even if there is no SDLT to pay, for eg because of a relief being claimed or because it falls below the threshold. 2. Late filing penalties: If the SDLT return is not filed (and paid) within the 14-day time limit, penalties may be applied. The penalty regime is currently: - Up to 3 months late: a fixed penalty of £100 is charged. - after 3 month date: the fixed penalty increases to £200. - In cases where the SDLT return is more than 12 months late, further penalties may be imposed up to the amount of the SDLT due. 3. Interest charges: if the SDLT payment is not made by the due date, interest charges may be levied on the outstanding amount on a daily basis. These penalties and time limits may be subject to change. Consult the official HMRC guidance or seek professional advice for the most up-to-date information.

How solicitors can help you remain compliant with your SDLT obligations

As solicitors, we play a crucial role in ensuring SDLT compliance. This includes:

• Highlighting and explaining your SDLT obligations at the outset of the transaction
• Calculating the SDLT due, including identifying and claiming any applicable reliefs or exemptions that may reduce your SDLT liability
• Accurately completing and submitting the necessary SDLT forms to HMRC, and ensuring the correct amount is paid within the deadline. Typically we handle the payment on your behalf and facilitate the transfer of funds to HMRC online
• Maintaining detailed records of all SDLT calculations, payments, and associated documents on file

Importantly, we can advise you at the outset on how best to structure your commercial property transaction from a tax point of view. We work closely with tax experts and financial advisors to understand your unique circumstances and SDLT implications, and find an appropriate solution. For eg, the way a lease is set up can reduce SDLT liability, therefore it is important to seek professional advice at the outset when negotiating heads of terms. 

Given the complexities of SDLT and its potential impact on your commercial property purchase, it is important to seek advice from qualified experts at the outset. At Harper James, we have extensive knowledge, expertise and connections in this area. We provide guidance tailored to your specific circumstances to help mitigate where possible, and comply with your SDLT obligations. Complete the form below and contact one of our experienced commercial property solicitors today.

About our expert

Rachel Jones

Areas of expertise, recent content.

Please leave us your details and we’ll contact you to discuss your situation and legal requirements. There’s no charge for your initial consultation, and no-obligation to instruct us. We aim to respond to all messages received within 24 hours.

Your data will only be used by Harper James Solicitors. We will never sell your data and promise to keep it secure. You can find further information in our Privacy Policy .

Explore related resources

Our offices, a national law firm.

Our commercial lawyers are based in or close to major cities across the UK, providing expert legal advice to clients both locally and nationally.

We mainly work remotely, so we can work with you wherever you are. But we can arrange face-to-face meeting at our offices or a location of your choosing.

Head Office

Regional spaces, like what you’re reading, get new articles delivered to your inbox.

Join 8,153 entrepreneurs reading our latest news, guides and insights.

How can we help?

To access legal support from just £145 per hour arrange your no-obligation initial consultation to discuss your business requirements.

Make an enquiry

Watch for free

Webinar series: Legal essentials demystified

Unlock valuable insights for your business growth in our webinar series. Whether you’re an HR professional, business owner, or in-house counsel, our webinars explain essential topics and common challenges.

Register for upcoming events or watch previous recordings.

Stamp Duty on a Commercial Lease (A Guide!)

• Last updated: 18 March 2024

IN THIS ARTICLE

Stamp Duty Land Tax (SDLT) must be paid on land transactions in England, including commercial leases over a certain threshold. SDLT may be payable on the grant, assignment, variation or surrender of a commercial lease.

The rules surrounding SDLT are complex and it is the tenant’s responsibility to calculate and pay any stamp duty on a commercial lease that is due to HMRC.

For commercial leases, SDLT can be charged on the premium (initial payment for the lease) and the rent, with different rules applying to each.

Understanding SDLT is crucial for businesses and landlords engaging in commercial property transactions because it affects the total cost of acquiring, leasing, or transferring property. The amount of SDLT payable depends on several factors, including the purchase price, property type, leasehold terms, and whether any SDLT reliefs or exemptions apply.

Several considerations can impact SDLT liability, including lease premiums, rent NPV, and specific lease terms like rent reviews.

Various SDLT reliefs could apply to reduce liability, such as for certain types of leases or transactions involving charities.

Properly managing SDLT obligations can prevent unexpected costs and penalties, making it a critical consideration for businesses and landlords in the UK commercial property market .

It’s essential to consult with professionals when negotiating lease terms and managing SDLT obligations to ensure compliance and minimise tax liability.

Section A: The Evolution of Stamp Duty

Stamp Duty in the UK has a long and varied history. It was initially introduced in 1694 as a temporary measure to fund war efforts against France.

It originally applied to vellum, parchment, and paper for legal documents or ‘instruments,’ with a physical stamp or seal signifying payment.

The success of the Stamp Acts in raising revenue led to their adoption in other European countries and attempts to introduce them in the American colonies, significantly contributing to the tensions leading to the American War of Independence.

Over the years, the scope of Stamp Duty expanded beyond legal documents to include newspapers, pamphlets, lottery tickets, playing cards, and various goods like hats, gloves, and perfumes. Initially charged as a fixed amount, Stamp Duty became an ad valorem tax (based on the value of the transaction) in 1808 for conveyances of sale, including land and shares.

The administration of stamp taxes has evolved. After several mergers of tax bodies, the Inland Revenue managed them, leading to the current oversight by HM Revenue & Customs (HMRC).

Significant changes in recent history include the replacement of Stamp Duty with Stamp Duty Land Tax (SDLT) for property transfers in 2003, which aimed to modernise the tax to apply to land transactions on a sliding scale.

SDLT requires a tax return to HMRC for all land transfers, with penalties for non-compliance, and is charged on leasehold transactions and freehold purchases. The tax structure and rates have seen adjustments over the years to reflect economic conditions and housing market changes, including various threshold adjustments and the introduction of relief measures for first-time buyers and certain disadvantaged areas.

Despite calls for its abolition and promises of reform, Stamp Duty continues to be a significant source of revenue for the UK government, reflecting the tax’s enduring role in the UK’s fiscal landscape.

Section B: How Stamp Duty is Calculated for Commercial Leases

Stamp Duty Land Tax calculation for commercial leases in the UK involves multiple components and depends on both the lease premium and the net present value (NPV) of the rent payable over the lease term. The process and applicable rates can vary depending on whether the property is considered residential or non-residential.

For new commercial leases, the SDLT calculation considers the premium and the rent’s net present value (NPV), which considers expected rental payments over the lease term at present-day prices. SDLT is not payable on premiums under £150,000 for annual rents less than £1,000, but once thresholds are exceeded, SDLT rates apply on a sliding scale based on the value of the transaction.

Additionally, the lease’s duration significantly impacts SDLT liability because the total rent payable over the life of the lease is considered, potentially attracting SDLT even for long leases with modest rent.

1. Calculation Components

a. Premium: SDLT on the lease premium is calculated similarly to that on the sale of a property. The rates may vary based on the total premium amount.

b. Rent: SDLT on rent is calculated based on the NPV of the rent over the lease term. The NPV is the current worth of all lease payments over the term, discounted back to present value.

2. For Non-Residential Leases

The SDLT on the premium follows a tiered structure. For example, you won’t have to pay SDLT on the premium for annual rents of £1,000 or more if the premium is under the £150,000 threshold.

SDLT on the rent portion is charged if the NPV exceeds certain thresholds. For instance, no SDLT is due on the NPV portion up to £150,000. Beyond this, SDLT rates apply on a sliding scale.

3. SDLT Calculator

For precise calculation, it’s recommended to use the SDLT lease transactions calculator provided by HMRC, as it accommodates various thresholds and rates for different portions of the consideration.

Section C: Current Stamp Duty Rates for Commercial Leases

For commercial leases in the UK, calculating Stamp Duty Land Tax (SDLT) involves considering both the premium paid for the lease and the net present value (NPV) of the rent over the lease term.

SDLT Rates for Non-Residential Leases are as follows:

Premium ◦ No SDLT is due on the premium if the annual rent is less than £1,000 and the premium is under the £150,000 threshold. ◦ The SDLT is calculated based on a percentage of the premium amount for premiums over these thresholds.

Rent (NPV) ◦ For the NPV of rent, no SDLT is payable if the NPV is less than £150,000. ◦ For NPVs between £150,001 and £5,000,000, the rate is 1%. ◦ If the rate is above £5,000,000, it increases to 2%.

SDLT Rates for Freehold Sales and Transfers • For transactions up to £150,000, no SDLT is payable. • For the portion from £150,001 to £250,000, a 2% rate applies. • For amounts above £250,000, a 5% rate is applicable.

An example provided for a freehold commercial property purchase priced at £275,000 shows a tiered calculation resulting in a total SDLT of £3,250, demonstrating how the tax applies progressively based on the transaction value.

It’s important to note that for new non-residential or mixed leasehold transactions, SDLT is calculated separately on the purchase price of the lease (lease premium) and the value of the annual rent (NPV). These amounts are then added together to determine the total SDLT due.

Section D: Stamp Duty Exemptions and Reliefs

Exemptions from Stamp Duty Land Tax (SDLT) on commercial leases include transfers with no payment exchange, properties inherited in wills, transfers due to divorce or dissolution of a civil partnership, freehold properties purchased for less than £40,000, and leases over seven years with premiums under £40,000 and annual rent less than £1,000. Reliefs may apply to first-time buyers, multiple dwellings, and properties bought for charitable purposes.

Always file an SDLT return to claim relief, even if no tax is due .

Section E: Submission and Deadlines

1. how to file & pay stamp duty.

To file and pay Stamp Duty Land Tax (SDLT) for a commercial lease in the UK, you typically need to use the HMRC’s online SDLT return system.

Gather the necessary documents, including transaction details, lease agreement, and proof of payment for the lease premium and rent.

Ensure accuracy in your submission to avoid penalties.

2. Filing & Payment Deadline

SDLT returns must be submitted to HMRC within 14 days of the effective transaction date, which could be the completion date, the date of the first rent payment, or when substantial performance of the transaction occurs. Late submission can result in penalties and interest charges .

For detailed and updated information on calculating SDLT for commercial leases, including any recent changes, visit the official GOV—UK pages on Stamp Duty Land Tax on Leasehold sales and the overview of SDLT .

3. Does Stamp Duty Land Tax only need to be paid at the start of the lease?

You may need to make further SDLT payments during the term of your lease.

Rent review

When the initial SDLT is calculated it is based on the first five years’ rent. If your lease includes a rent review within the first five years and a new rent is agreed you will need to file an additional SDLT payment to cover the revised rent. In some circumstances rent reviews that occur after the first five years may also incur SDLT if it has been deemed an abnormal increase. This situation can occur when rent has been kept artificially low for the initial period in an attempt to reduce SDLT.

Holding over

If a lease expires but the tenant remains in occupation of the premises this is known as ‘holding over’. Any lease that continues after its expiry is treated as if the original lease has extended for a year. If SDLT was paid at the commencement of the lease, or if the lease has been taken over the SDLT threshold with this additional year an SDLT Return and additional payment must be made to HMRC.

Lease renewals

Renewal leases are subject to the same SDLT rules as normal leases.

Breaking a lease

Tenants who are considering breaking their lease should be aware they will not be entitled to receive a SDLT refund from HMRC for the remainder of their lease term.

Section F: Common Mistakes to Avoid

Common mistakes businesses make with Stamp Duty on commercial leases include:

• Miscalculating the net present value (NPV) of the rent. • Not claiming eligible reliefs. • Missing deadlines for filing and payment can lead to penalties.

To avoid these errors, always use the HMRC’s SDLT calculator for accurate calculations, thoroughly review eligibility for reliefs or exemptions, and ensure that all SDLT returns are submitted and payments are made within 14 days of the transaction’s completion.

Stamp Duty on Commercial Leases FAQs

What are the Stamp Duty rates for commercial leases? 

Rates vary based on the lease’s premium and the rent’s net present value (NPV). Use the HMRC’s SDLT calculator for specifics.

What are the deadlines?

SDLT returns and payments must be submitted within 14 days of transaction completion.

How do I file? 

Filing is done through HMRC’s online portal. Have lease details and payment information ready.

Are there exemptions?

Certain transactions, like transfers with no payment, inheritances, and leases under specific thresholds, may be exempt.

Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law , Tax , Human Resources , Immigration & Employment Law .

Gill is a Multiple Business Owner and the Managing Director of Prof Services - a Marketing Agency for the Professional Services Sector.

• Gill Laing https://www.lawble.co.uk/author/editor/ Finding the Best Employment Solicitors
• Gill Laing https://www.lawble.co.uk/author/editor/ Employment Law in the UK: A Deep Dive
• Gill Laing https://www.lawble.co.uk/author/editor/ Your Guide to Choosing Consumer Solicitors
• Gill Laing https://www.lawble.co.uk/author/editor/ A Comprehensive Guide to UK Immigration Law

Subscribe to our newsletter

Filled with practical insights, news and trends, you can stay informed and be inspired to take your business forward with energy and confidence.

Lawble is a Rokman Media brand © 2024. All rights reserved.

Lawble is a registered trademark of Rokman Group Limited and may not be used by third parties without permission.

Website by Prof Services

Type above and press Enter to search. Press Esc to cancel.

When is Stamp Duty payable on commercial leases?

15th april 2019.

Anyone purchasing a property will have heard of Stamp Duty Land Tax or SDLT for short. While most people will be aware that it’s payable on home purchases above a certain value, they may not be aware that it can also be payable on commercial leases .

What is SDLT?

Most simply put, SDLT is a tax applied to land transactions that are payable to HMRC. This tax includes leases, not just property purchases.

How much is SDLT?

As with domestic properties, the amount of SDLT depends upon the value of the commercial lease. The rates are:

• Up to £150,000 there is no SDLT liability
• Between £150,001 and £5,000,000 is liable at a rate of 1%
• Above £5,000,001 there is an SDLT rate of 2%

For example, a lease worth £10,000,000 will pay nothing on the first £150,000, then 1% on the amount between £150,001 and £5,000,000, then 2% on the remaining £5,000,000.

How is the value calculated?

The rules are somewhat complex, and calculating the correct amount can be difficult. However, it’s important to get it right as too low a payment will result in interest being added to the outstanding amount, while it can be difficult to secure a refund from HMRC if there is an overpayment.

SDLT takes into account a number of factors to reach what is known as the Net Present Value (NPV), including:

• The lease premium (a lump sum paid at the start of the lease)
• The rent, including VAT if applicable
• The length of the lease
• Chargeable considerations, for example, the tenant’s obligation to carry out repairs or services on the rented property

The value of the first five years’ rent is used to calculate the NPV. Should the lease extend beyond five years, then the highest yearly amount paid during the initial five years is used to calculate the NPV for those successive years.

When should SDLT be paid?

To ensure that no interest or charges are applied to the amount, SDLT needs to be paid within thirty days of the lease taking effect. Even deciding when the lease takes effect can be complicated as it can vary. It may be the day that the contract is signed, the day that the tenant takes possession of the property or the day that the first rent payment is made.

Certain events can also trigger additional SDLT payments, such as renewing and extending the lease, a change of terms, a rent revision, or the tenant staying in the property once the original lease has run out.

Who is responsible for SDLT?

The tenant is solely responsible for all aspects of SDLT, from calculating it to ensuring that it is paid on time. The landlord bears no responsibility.

It can be a surprise to learn that commercial leases can be liable for SDLT, in the same way, that property purchases are. Calculating SDLT correctly is important and, as demonstrated here, doing so is not a straightforward process. That’s why it’s vital to engage an experienced and knowledgeable solicitor, such as one of our expert team at Robinsons Solicitors.

For Businesses

For individuals.

Contact our offices

• New enquiries
• 0161 696 6170
• Residential conveyancing enquiries
• 0333 999 7134

Make an enquiry

• Request a callback
• Chat with us

• For business
• Commercial property solicitors
• Landlord & tenant

Stamp Duty Land Tax (SDLT) on leases

How can we help?

Submitting your details indicates your consent for a member of our team to contact you about your enquiry and obtain feedback regarding our service. To learn more about how we keep your information safe please read our  privacy policy .

Stamp Duty Land Tax (SDLT) is sometimes payable by tenants on leases. The SDLT payable is determined by the value of the lease, which is calculated based on any premium paid, the rent payable and the length of the lease. SDLT is more likely to be payable with medium to longer term leases or when the rents are higher. 

The SDLT becomes payable on the ‘effective date’ of the lease. This is usually the date of completion of the lease, though this date can sometimes vary if there has been ‘substantial performance’ before completion. The current filing deadline is 14 days from the effective date of the transaction. If SDLT is payable then an SDLT form will need to be lodged with HMRC within the relevant time frames along with any payment due.

Please note that whether or not SDLT is payable on your lease transaction, an SDLT form will still need to be filed with HMRC if the lease is for a term of seven years or longer.

Should you have any concerns regarding SDLT issues please do not hesitate to contact our commercial property solicitors on  01616 966 229 or complete our online enquiry form and we will contact you directly.

There are a number of circumstances during the term of your lease when SDLT may again become payable. It is imperative that you are aware of these circumstances as HMRC are becoming more and more aggressive in their pursuit of individuals and companies who have avoided, forgotten or simply not been aware that an SDLT payment has become due. You could be liable to fines and interest payments if you fail to correctly pay SDLT when due. The Inland Revenue have the ability to query for many years after they were due, and this gives them a large amount of leeway to chase missed SDLT payments. 

Below are a number of circumstances which may arise during, or at the end of your current lease, and which may give rise to an SDLT liability. Should you require any advice in respect of the same either now, or at any stage in the future, please do not hesitate to contact us closer for further advice. Please note that the responsibility for SDLT payments is your own and not knowing the rules will not be a valid excuse for HMRC.

Common SDLT requirements under leases

Rent review.

The SDLT payable on a lease is calculated by reference to the first five years’ rent. Therefore, if you have a rent review within the first five years and the new rent amount was not known at the outset (for example where rents are to be reviewed in line with market rents or business results as at a future date, or index-linked) then an additional return may need to be filed once the revised rent is determined. A further payment of SDLT may also be due at that stage.

Accordingly it is advisable to seek advice prior to or on the determination of any rent review, to ascertain the likely SDLT implications and whether any payments are required.

Lease expiry and holding over

If your original lease term expires, but you continue in occupation of the premises, then you are deemed to be ‘holding over’ your lease. Once your lease continues after its contractual expiry date then it is treated as if the original term of your Lease has been extended by one year. i.e. a five year lease will be treated as a six year lease. If SDLT was paid at the start of your lease (or if the extra year takes the lease over the SDLT threshold), then at this stage a further SDLT payment will be required and will need to be filed with HMRC. For each subsequent year that the lease is ‘held over’ another SDLT form needs to be filed. This is known as the growing lease regime. Failure to file further returns within the relevant short timescales could could result in fines.

Lease renewals

Unless your lease is expressly excluded from the Landlord and Tenant Act 1954, then as a commercial tenant, you are entitled to a new lease (on substantially the same terms) at the expiry of your current lease. Such renewal leases could have SDLT implications. 

You should always seek legal advice when taking a renewal lease as you have numerous rights to which you will be entitled. SDLT issues will also apply in this scenario.

Lease extension

If you agree to extend the term or the extent of the land included in your lease, then the extension is treated as a surrender and re-grant, and SDLT may be payable on the value of the re-granted lease. 

Breaking a lease

Please note that if you decide to break your lease early, you are not entitled to get any money back from HMRC, despite having paid SDLT for the full lease term. 

Related services

• Commercial litigation
• Landlord and tenant disputes
• Contract disputes
• Employment law & HR support
• Regulatory law

loading staff

Commercial property reorder

• David Baybut
• ​Chris Graves
• Louise Hebborn
• Paul Davies
• Gary Jackson
• Jessica Charnock
• Holly Duncanson
• Robert Gambles
• Michael Cheetham
• Samantha Cokayne

Get in touch

Find your nearest Stephensons office and arrange a meeting

As an award-winning top 150 law firm, with over 250 staff based in offices across the country, you're never far from the advice you need.

• View all offices
• Pay us online
• SRA interventions
• Careers at Stephensons
• Conveyancing quote
• Existing clients

You are using an outdated browser. Please upgrade your browser to improve your experience.

Representing you in life & business

• Reading 0118 951 6800
• Henley-on-Thames 01491 572 323
• Wokingham 0118 951 6888
• London 020 3031 6605

Insights // 19 May 2016

Stamp Duty Land Tax (SDLT) on Commercial Transactions Explained

Partner katja wigham, in our commercial property team , explains recent stamp duty land tax (sdlt) changes for commercial property..

As announced in the 2016 Budget, the Stamp Duty Land Tax (SDLT) rates structure for sales of and grants of leases in, non-residential and mixed property was changed with effect from 17 March 2016 (subject to transitional rules). The effect of the changes will be that, for sales of non-residential or mixed use property, the same or less SDLT will be payable if the non-rental consideration is £1.05 million or less. However, for higher value transactions, the SDLT charge will increase. For leases with a net present value of over £5 million a new 2.0% rate has been added.

For sales, the new rates structure adopts the fairer "slice" system under which that part of the entire consideration falling within a particular band is taxed at the rate applicable to that band (the slice system already applies for rent consideration). This replaced the former "slab" system under which SDLT was levied at a single rate on all the chargeable consideration for the transaction.

If you buy a freehold commercial property for £275,000, the SDLT you must pay is calculated as follows:

• 0% on the first £150,000 = £0
• 2% on the next £100,000 = £2,000
• 5% on the final £25,000 = £1,250
• Total SDLT = £3,250

On the grant of a new commercial lease, the charge to SDLT is based on the VAT inclusive rent (where actually payable), calculated by reference to the Net Present Value. The calculation is complicated, but the 2016 regime has now introduced a 2.0% rate to SDLT where the NPV exceeds £5 million as per the table below.

Although the introduction of the “slice” system is arguably fairer than the old “slab” system, thereby reducing the liability to SDLT in the case of lower value transactions, higher value transactions will be caught by a higher charge to SDLT.

For further information or legal advice, please contact  [email protected]  or call 0118 951 6800. 

This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.

Katja Wigham

Partner, Commercial Property Law

News & Insights

Insights // 14 May 2024

Commercial Property - Does Signing Heads of Terms Create a Binding Agreement?

News // 09 May 2024

Blandy & Blandy Promotes Two Associates

News // 03 May 2024

Firm Re-accredited by Law Society's Conveyancing Quality Scheme

Insights // 25 Apr 2024

Out of Court Settlements in Family Law – Changes to the Family Procedure Rules

SDLT: leases | Practical Law

SDLT: leases

Practical law uk practice note 8-107-4821  (approx. 41 pages).

SDLT—common lease transactions

Published by a lexisnexis tax expert.

This Practice Note provides an overview of the stamp duty land tax (SDLT) treatment of the following common lease transactions:

grant of a lease

linked leases

surrender and re-grant of a lease

agreement for lease

assignment of an agreement for lease

reverse premium

assignment of a lease

variation of a lease

surrender of a lease

lease to a bare trustee or nominee, and

reversionary lease

For information on when SDLT applies generally, see Practice Note: Land transactions, chargeable interests and chargeable transactions and for details of how to calculate SDLT payable on lease transactions, see Practice Note: SDLT chargeable consideration—leases.

This Practice Note does not cover leases and holding over. For more on this topic, see Practice Note: SDLT and holding over.

SDLT ceased to apply to any land transaction involving any interests in or over land in Scotland from 1 April 2015. From that date, land and buildings transaction tax (LBTT) applies to such transactions, subject to transitional provisions. Consequently, references in this Practice

Access this content for free with a 7 day trial of LexisNexis and benefit from:

• Instant clarification on points of law
• Smart search
• Workflow tools
• 41 practice areas

** Trials are provided to all LexisNexis content, excluding Practice Compliance, Practice Management and Risk and Compliance, subscription packages are tailored to your specific needs. To discuss trialling these LexisNexis services please email customer service via our online form. Free trials are only available to individuals based in the UK, Ireland and selected UK overseas territories and Caribbean countries. We may terminate this trial at any time or decide not to give a trial, for any reason. Trial includes one question to LexisAsk during the length of the trial.

Get your quote today and take step closer to being able to benefit from:

• 36 practice areas

Get a LexisNexis quote

* denotes a required field

To view the latest version of this document and thousands of others like it, sign-in with LexisNexis or register for a free trial.

Existing user? Sign-in CONTINUE READING GET A QUOTE

Related legal acts:

• Finance Act 2003 (2003 c 14)

Key definition:

Stamp duty definition, what does stamp duty mean.

A transfer tax payable on documents and instruments, rather than in respect of a transaction. It is most commonly encountered on the transfer of UK certificated shares, where the stock transfer form is the instrument that is stamped.

Popular documents

Stamp duty reliefs—intra-group, reconstruction and acquisition reliefs.

Stamp duty reliefs—intra-group, reconstruction and acquisition reliefsFORTHCOMING CHANGE relating to the modernisation of stamp taxes on shares framework: Following the call for evidence in 2020, the resulting outcome published in 2021 and consideration by the relevant HMRC and industry working

For stamp duty relief under section 77 of the Finance Act 1986 (FA 1986) to apply, must the acquiring

For stamp duty relief under section 77 of the Finance Act 1986 (FA 1986) to apply, must the acquiring company in a share for share exchange have a share structure identical to the target company?Full stamp duty relief may be available for the acquiring company in a share-for-share exchange if

SDLT and partnerships—transfers to a partnership

SDLT and partnerships—transfers to a partnershipThis Practice Note explains the special stamp duty land tax (SDLT) rules which apply when an interest in land is transferred to a partnership from one or more partners or persons connected with one or more partners. This includes a transfer on

SDLT—common lease transactionsThis Practice Note provides an overview of the stamp duty land tax (SDLT) treatment of the following common lease transactions:•grant of a lease•linked leases•surrender and re-grant of a lease•agreement for lease•assignment of an agreement for lease•reverse

0330 161 1234

• International Sales(Includes Middle East)
• Latin America and the Caribbean
• Netherlands
• New Zealand
• Philippines
• South Africa
• Switzerland
• United States

Popular Links

• Supplier Payment Terms
• Partner Alliance Programme

HELP & SUPPORT

• Legal Help and Support
• Tolley Tax Help and Support

LEGAL SOLUTIONS

• Compliance and Risk
• Forms and Documents
• Legal Drafting
• Legal Research
• Magazines and Journals
• News and Media Analysis
• Practice Management
• Privacy Policy
• Cookie Settings
• Terms & Conditions
• Data Protection Inquiry
• Protecting Human Rights: Our Modern Slavery Agreement

Commercial lease: Don’t forget to pay the stamp duty land tax

Have you just taken a lease on a shop or purchased a leasehold business with a new lease being granted to you? 

People often think that nothing is left to be done, but this is not always the case as there are still matters that need to be addressed after completion from a legal perspective. 

One of those is stamp duty payable on a lease being granted to you, and if you don't use a solicitor, the likelihood is you didn't know you had to pay this and register your lease at the land registry (if over seven years).

When taking a grant of a lease (when the requirements are met for that lease) it is a legal requirement that a stamp duty land tax (SDLT) return will need to be filed. 

Prior to completion, your solicitor or legal advisor would have calculated the amount of SDLT due and will pay this for you within 14 days of the effective date of the transaction. 

A common mistake that can occur in the event a solicitor or legal advisor not being instructed is that there is no SDLT on short term leases. This is not the case. Based on the net present value of the lease (being the term of years and level of rent calculated by HMRC) for non-residential properties, an SDLT return may need to be filed to HM Revenue & Customs (HMRC) and the tax paid within 14 days. Failure to do so will result in penalties.

The amount of SDLT you will be required to pay will depend on a number of factors. It is also important to consider if you are eligible for any SDLT relief. 

Your solicitor is best placed to do this, so you can cause yourself considerable issues in the future by not using one. 

An example is a restaurant owner who several years ago entered into a new lease of their restaurant and is now looking to sell. At a rent of £60,000 per annum, they were not aware (not using a solicitor) that they were required to pay SDLT. 

They are now selling their business, and the buyer has correctly (through their solicitor) asked for the lease to be registered and evidence of the SDLT being paid. 

The seller is now required to post completion of their lease, pay the SDLT and register the lease. They are now also required to pay a tax based penalty and interest on the initial £7,000 SDLT payment – all because they didn't use a solicitor at the time.

Non-residential property includes commercial property such as shops and offices, agricultural land and any property not used as a residence. A mixed-use property combines both residential and non-residential elements, the most common of which includes a shop with residential flats above.

The moral of this story is clear. Make sure you take proper advice, and you ensure you don't "save money" by not using a solicitor. A good commercial solicitor will add value and save you money, as the above case study clearly shows.

What happens with late payment

In the event of a late payment or late filing, buyers will pay an automatic fixed penalty. 

The amount of the penalty will depend on the lateness of the return. For a late filing of up to three months from the filing deadline, there is a fixed penalty of £100 rising to £200 for returns later than three months plus any interest that is payable from the filing deadline until the date the SDLT is paid. 

In extreme cases where a filing is late by more than 12 months, HMRC will charge a tax-based penalty, which can be up to the amount of SDLT due on the land transaction return, which is exactly what the restaurant owner discussed above is faced with. 

If a tax-based penalty is imposed, then HMRC will send you a formal penalty notice showing how this tax-based penalty is calculated, which is to be paid within 30 days. It is important to understand that this penalty can amount to the full amount of the tax due on the return.

Paying your SDLT late, in any event, will cause a detrimental effect from a financial point of view. Penalties incurred as a result of an unknown deadline, or a miscalculation is something that can be easily avoided if a solicitor is instructed who is aware of the existence of these rules in place.

Expert legal advice on your commercial property matters

SO Legal has offices across the South East. Our team of commercial property solicitors in London, Brighton, Eastbourne, Hastings and Uckfield can help you understand your options. 

If you need support with a commercial lease or want an informal no-obligation discussion, contact our team.

Looking for expert legal advice?

Stamp Duty Land Tax (SDLT)

Calculates lease or long-leasehold sdlt for commercial properties (non-residential) from march 2016 onwards..

(Freehold calculator here )

Contact Information

©2024 AcquirePremises

Property Information

(links to external sites)

Find who owns property

Find a property's Rateable Value

Find a property's Flood Risk Status

Find Chartered Surveyors and Services

Find Enterprise Zone Locations

New Investment Zones

Financial Tools and Data

Freehold SDLT Calculator

Leasehold SDLT Calculator

Retail and Consumer Price Indices

(links below to external sites)

Bank of England data

Cookies on GOV.UK

We use some essential cookies to make this website work.

We’d like to set additional cookies to understand how you use GOV.UK, remember your settings and improve government services.

We also use cookies set by other sites to help us deliver content from their services.

You have accepted additional cookies. You can change your cookie settings at any time.

You have rejected additional cookies. You can change your cookie settings at any time.

beta This part of GOV.UK is being rebuilt – find out what beta means

• Business tax

Stamp Duty Land Tax Manual

Sdltm17090 - miscellaneous provisions: lease assignments: treated as new lease.

If the grant of a lease (that is, the original lease) is exempt from charge under any of the following

FA03/S57A - sale and leaseback arrangements

FA03/SCH7/PART1 - group relief

FA03/SCH7/PART2 - reconstruction and acquisition relief

FA03/S66 - transfers involving public bodies

FA03/SCH8 - charities relief

FA03/S123(3) - regulations reproducing in relation to SDLT the effect of enactments providing for exemption from stamp duty (SI 2003/2867)

Paragraphs 6 and 8 of Part 3 of Schedule 61 to the Finance Act 2009 (alternative finance investment bond relief)

Part 1 or 2 of Schedule 7A (PAIF seeding relief and COACS seeding relief

then the first assignment of the lease that is not exempt under any of the above provisions is treated as the grant of a lease by the assignor - FA03/SCH17A/PARA11

Any such deemed grant is treated as being for a term equal to the unexpired term of the original lease and on conditions (for example, rent and review periods) equal to those on which the assignee holds that lease after assignment.

Any capital amount paid for the assignment is chargeable in addition to any charge underFA03/SCH17A/PARA11.

FA03/SCH17A/PARA11 does not apply where

• group relief
• reconstruction and acquisition relief or
• charities relief
• PAIF seeding relief, COACS seeding relief

is withdrawn due to a disqualifying event occurring before the effective date of theassignment. Refer to SDLTM23000 and SDLTM26000.

This provision will only apply where the initial grant of the lease was or would otherwisehave been subject to SDLT.

A Ltd grants its subsidiary, B Ltd, a lease for a term of 25 years and B Ltd claims group relief on the grant

after one year B Ltd assigns this lease to C Ltd, an unconnected third party

As the lease benefited from a relief at the previous transaction, (the grant by A Ltd to B Ltd), the assignment is treated as the grant of a lease for 24 years, this being the remainder of the original term. This transaction is treated as the grant of a new lease by B Ltd to C Ltd for notification purposes.

C Ltd would have to file a land transaction return and pay SDLT on the net present value of the remaining rent as for a normal grant and on any capital sum paid to B Ltd for the assignment.

A Ltd grants a lease to an unconnected company B Ltd

B Ltd pays stamp duty land tax on the chargeable consideration of the new lease

B Ltd subsequently assigns this lease to C Ltd

As the lease hasn’t been subject to a relief claim in respect of the previous transaction (the grant from A Ltd to B Ltd), the assignment from B Ltd to C Ltd is not treated as the grant of a new lease.

Any capital sum paid to B Ltd is chargeable to stamp duty land tax.

Is this page useful?

• Yes this page is useful
• No this page is not useful

Help us improve GOV.UK

Don’t include personal or financial information like your National Insurance number or credit card details.

To help us improve GOV.UK, we’d like to know more about your visit today. Please fill in this survey .

• Property Sales & Purchase
• Leases, Licences & Tenancies
• Business Contracts & Structures
• Business Sales & Purchases
• Agricultural Property
• House Sales & Purchases
• Remortgages
• Estates & Trusts
• Elderly Clients
• Powers of Attorney
• Court of Protection
• Diocesan Registry
• Clergy Discipline
• The Office Dogs
• Instant Conveyancing Estimate
• Insights & Events

Do I have to pay SDLT on a Commercial Lease?

Understanding Stamp Duty Land Tax (SDLT) on commercial properties is crucial for investors, business owners, and real estate professionals.

One common question is: are commercial property leases subject to SDLT? The answer is yes, but it’s a fairly complex topic.

What is SDLT?

SDLT is a tax levied on property transaction and applies to non-residential properties when the value of the transaction exceeds £150,000, although returns are required to be sent to HMRC if the value is more than £40,000 (save in the case of leases of less than 7 years), even if no duty is payable.

There is no reference to “commercial property” in the SDLT regulations, but rather if a property is not deemed to be a residential “Dwelling” under the regulations, then the rules relating to non-residential SDLT apply.

So, the non-residential rules will apply to all types of land and commercial properties including office buildings, retail spaces, warehouses, industrial sites and bare land.

Additionally, mixed-use properties, which combine residential and non-residential/commercial elements, will be treated as non-residential but we this is an incredibly complex area that we cannot cover here, but would be more than happy to talk to you about this if you have any questions.

SDLT Rates for Commercial Property Leases

The calculation of SDLT for commercial leases is based on any lease premium the tenant pays and the rent due under the lease terms, which may include VAT if applicable; yes, you read that correctly; you will pay SDLT on the VAT element of the rent.

The SDLT payable depends on the lease’s “Net Present Value” (NPV), which is calculated by reference to the lease length and the total rent over the term of lease.

For leases longer than five years, the NPV calculation is based on the highest rent paid over any 12-month period during the first five years.

However, it’s crucial to note that regardless of whether SDLT is payable, an HMRC return is still going to be needed if your new lease is for a term of more than seven years, unless you pay a premium of less that £40,000 and the rent is less than £1000, which is unlikely nowadays. If your lease is for less than seven years, no return will be required unless the NPV is more than £150,000 (at current rates).

In addition, the SDLT implications can change over the lease term. For example, if a lease is extended or renewed or if a rent review results in a change in the rent amount, this could affect the SDLT liability and so you must always go back and review the calculation in such circumstances.

The SDLT rates for commercial properties are structured in tiers.

The first £150,000 of any transaction value (including the NPV of a lease) does not attract any SDLT. The next £100,000 (i.e. between £150,000 and £250,000) is charged at 2% and the remaining value is charged at 5%.

It is important to calculate the SDLT at the outset of the transaction so that you can budget for it.

Exemptions and Reliefs

Certain transactions may qualify for exemptions or relief from SDLT. These can include property transfers to a charity or in specific corporate restructuring scenarios.

If you think that your transaction will be eligible for any such relief, it would be essential to consult with a tax professional to make sure that you meet any necessary eligibility criteria

If you are thinking about taking on a commercial lease, or any commercial property, please contact us to find out more.

When Should I Consider Making a Will?

Conveyancing: why instructing batt broadbent is essential for a seamless property transaction, get in touch, we're here to make your legal matters as stress-free as possible..

Based in Salisbury and Chippenham, we specialise in a wide range of legal services for businesses and individuals.

• Practical Law

What are the SDLT issues where there is an assignment of a lease between group companies?

Practical law resource id a-127-8551  (approx. 3 pages), get full access to this document with a free trial.

Try free and see for yourself how Practical Law resources can improve productivity, efficiency and response times.

About Practical Law

This document is from Thomson Reuters Practical Law, the legal know-how that goes beyond primary law and traditional legal research to give lawyers a better starting point. We provide standard documents, checklists, legal updates, how-to guides, and more.

650+ full-time experienced lawyer editors globally create and maintain timely, reliable and accurate resources across all major practice areas.

83% of customers are highly satisfied with Practical Law and would recommend to a colleague.

81% of customers agree that Practical Law saves them time.

• Taxation - Land and Buildings
• SDLT and LTT