stamp duty on an assignment of a lease

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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

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

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Tá an chuid seo den suíomh idirlín ar fáil i mBéarla amháin i láthair na huaire.

Stamp Duty and leases

• Residential houses and apartments

Agreements, assignments and surrenders

• Difference between a lease and a licence
• Paying Stamp Duty on residential leases
• Varying a lease
• Transitional arrangements

Agreement for lease

Instead of executing (signing, sealing or both) a lease, you may execute an agreement for lease. An agreement for lease sets out the terms that would be included in a lease.

You must pay Stamp Duty if the agreement is for:

• a period no longer than 35 years, or for an indefinite period
• any period over 35 years where you have paid 25% or more of the consideration in the agreement
• the lease of a residential house or apartment where the annual rent is €50,000 or greater.

You must pay Stamp Duty on the consideration and period set out in the agreement.

If the agreement was executed (signed, sealed or both) before 17 December 2023, please refer to Section 2.6 of the TDM Schedule 1 - Stamp Duties on Instruments for the previous thresholds.

Assignment of a lease

Leases are between a landlord and a tenant. If a tenant assigns (transfers) the lease to another person, Stamp Duty must be paid on the assignment. You treat an assignment the same way as a purchase of property.

Mary leases the premises in which she conducts her accountancy business from John. She entered into the lease in 2015. The period of the lease is 20 years. She pays €10,000 in rent each year.

Her business is doing well and she needs to move to a bigger premises. Tom agrees to pay Mary market value, that is, €20,000 to take over the lease.

The instrument (usually called a Deed of Assignment) to transfer the lease is executed on 2 February 2019. Tom pays Stamp Duty on this Deed. He pays Stamp Duty on €20,000. The Stamp Duty rate is the rate applicable to transfers of non-residential property.

Once the lease is assigned to Tom, Tom takes over all the obligations in the lease, for example, to pay rent to the landlord.

Surrender of a lease

A surrender of a lease is not the same as an assignment of a lease. Once you surrender your lease to the landlord, it ceases to exist.

For further information, please see Exchanges, partitions, releases and surrenders .

Next: Difference between a lease and a licence

Published: 28 March 2024 Please rate how useful this page was to you Print this page

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Is SDLT chargeable on the assignment of a lease?

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• Landlord and Tenant
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• SDLT and LTT

Assignment of Lease Explained

• December 1, 2023

Understanding the complexities surrounding the assignment of a lease is crucial for both tenants and landlords. Within the UK, various situations might compel a tenant to transfer their lease to another party. In this guide we will delve into the essentials, helping you understand every facet of a lease assignment.

What is an Assignment of Lease?

In the world of property management and real estate, the concept of an “assignment of lease” is fundamental. It involves a tenant, known as the assignor, transferring their entire legal interest in a property to another individual or entity, called the assignee. This process is common in both residential and commercial contexts and plays a significant role in maintaining the fluidity of property interests, especially in a dynamic market.

When a tenant signs a lease, they agree to specific commitments, including paying rent and maintaining the property, which are enforceable for a set period. However, various circumstances may prompt a tenant to vacate the property before the lease term expires. Herein lies the importance of the assignment of lease.

Through lease assignment, the original tenant can exit the property and pass on the responsibility to a third party, who then assumes the role of the tenant with all its incumbent responsibilities. It’s important to note that while the new tenant steps into the shoes of the original tenant, the lease terms remain unchanged.

For instance, if an individual rents a flat and later decides to move out before the lease’s expiration due to reasons such as relocating for a job or changing living situations, they may opt for an assignment of the lease. This strategy allows another person to take over the living space and adhere to the responsibilities under the original lease, ensuring that the flat does not remain unoccupied and the landlord continues to receive rent payments. This seamless transition can be especially beneficial in residential areas with high demand for housing, as it minimises financial instability for the landlord and provides immediate accommodation for those in need of a home.

Key Components of Lease Assignment

• Assignor and Assignee: The existing tenant (assignor) and the new tenant (assignee) are the primary parties in this agreement. Their willingness to transfer and assume the lease’s obligations, respectively, drives the assignment process.
• Landlord’s Role: While not a direct party to the assignment, the landlord plays a pivotal role. Most lease agreements stipulate that landlords must provide consent before any assignment takes place. This clause protects the landlord’s interests, ensuring the new tenant is reliable and meets the required standards.
• Legal Documentation: The process requires several legal documents, including the initial lease agreement and a deed of assignment. The latter must clearly articulate that all rights and responsibilities have been transferred to the new tenant. This precision prevents future disputes regarding the terms of the lease.
• Liabilities: The assignment of lease doesn’t inherently absolve the original tenant of responsibilities. Depending on the agreement’s terms, the assignor might remain liable if the assignee fails to fulfil the lease obligations. This potential continued liability underscores the importance of thorough assignee vetting.

The Legal Ground

The legality surrounding the assignment of a lease is rooted in UK property law. It necessitates compliance with various statutory requirements and often involves complex legal procedures. Consequently, parties usually engage solicitors to ensure that the assignment aligns with legal protocols, protecting the interests of all involved parties.

The assignment of a lease is a nuanced process, influenced by factors unique to each situation. Whether prompted by personal, business, or financial changes, lease assignments facilitate flexibility in property occupancy and use. Understanding this concept is crucial for tenants seeking an early exit from a lease, individuals looking for established lease properties, and landlords wishing to maintain continuous tenancy and income streams.

Understanding the Deed of Assignment of Tenancy

A “deed of assignment tenancy” is a legal document that evidences the transfer of lease obligations from the current tenant to another. It is an essential part of the lease assignment process, binding the new tenant to the terms stated in the original lease.

Landlord’s Checks Before Permitting Assignment of a Lease

The assignment of a lease, while beneficial in maintaining continuous occupancy and consistent rent payments, necessitates thorough due diligence on the part of the landlord. Before consenting to an assignment, it’s imperative for landlords to conduct comprehensive checks, mirroring the depth of evaluation done during the initial tenant screening process. These checks are crucial in mitigating potential risks and safeguarding the landlord’s investment.

Detailed Assessment of the Prospective Assignee

Landlords should ascertain the financial stability and reliability of the assignee. This assessment often involves:

• Credit Checks: This allows landlords to have a clearer understanding of the prospective assignee’s credit history, highlighting their ability to keep up with regular rent payments and financial commitments.
• Employment Verification: Landlords typically require proof of ongoing, stable employment. This verification helps ensure that the new tenant has a consistent income stream capable of covering the rent and other associated costs.
• References: Previous landlords or property managers can provide insights into the assignee’s behaviour, paying habits, and overall reliability. Personal references might also be necessary to form a more comprehensive view of the prospective tenant.

Review of the Assignee’s Intent

Understanding the prospective tenant’s reasons for seeking the property and their long-term intentions can provide reassurance. For instance, landlords should feel more comfortable knowing that the assignee plans to reside in the property for an extended period and doesn’t intend to sublet without permission or engage in unlawful activities.

Examination of Financial Documentation

Landlords may request documentation such as bank statements or savings accounts to further verify the assignee’s ability to afford the property. This scrutiny is particularly pertinent in higher-rent areas or for properties with higher maintenance costs.

Ensuring Contractual Compliance

It’s important for the landlord to confirm that the assignee understands and agrees to the terms set out in the original lease. The assignee must comply with all existing conditions, and any deviation needs to be negotiated with and approved by the landlord.

Legal Considerations

Given the legal complexities surrounding lease assignments, landlords often seek legal advice during this process. Lawyers can help ensure that the assignment adheres to local property laws, the original lease’s terms, and that the landlord’s interests are thoroughly protected throughout the transition.

By conducting these comprehensive checks, a landlord exercises due diligence, significantly reducing the likelihood of issues arising from the assignment of the lease. This meticulous approach helps maintain the property’s revenue stream, upholds community standards, and ensures the continued preservation and value of the property investment. It’s a proactive measure, providing the landlord with peace of mind that they are handing over their property to a reliable and responsible assignee.

Costs Involved in Lease Assignment

The process of lease assignment, while a practical solution for tenants looking to transfer their lease obligations, does entail various costs that both the assignor (original tenant) and assignee (new tenant) need to consider. These expenses contribute to a seamless transfer process, ensuring all legalities are properly managed, and all parties are adequately protected. Understanding these costs is essential as it prevents unexpected surprises and allows for a more transparent transaction.

Costs for the Assignor

• Advertising Costs: If the landlord does not immediately have a new tenant, the original tenant may need to advertise the property. This could involve online listings, printed materials, or hiring an estate agent to expedite the process, all of which incur costs.
• Tenant Screening Costs: The assignor might opt to conduct preliminary screenings of potential assignees, which include credit checks, reference checks, and other background investigations to ensure they’re presenting a reliable tenant to the landlord.
• Legal Fees: The legal intricacies of transferring a lease require the involvement of legal professionals. The assignor typically bears the cost for legal consultations, drafting the deed of assignment, and any related legal documentation.
• Landlord’s Administrative Fees: Some landlords charge an administrative fee for processing a lease assignment, covering the time and resources they expend to conduct their checks and modify their records.
• Potential Liability Costs: If the assignee fails to meet the lease obligations, and depending on the terms of the assignment, the original tenant may remain partially liable. This contingent liability could lead to future costs.

Costs for the Assignee

• Security Deposit: It’s standard practice for the new tenant to provide a security deposit before moving in. In some cases, the assignee reimburses the original tenant for the initial deposit, depending on its condition and any agreement between the parties.
• Advance Rent: The assignee may need to pay the first month’s rent in advance, similar to standard leasing arrangements.
• Legal Fees: Assignees also incur legal fees. They need legal counsel to review the terms of the lease, ensure the assignment is conducted correctly, and understand their new responsibilities and liabilities.
• Stamp Duty: Depending on the property’s value and the lease’s remaining duration, the assignee might need to pay Stamp Duty Land Tax (SDLT) on the premium or the rent of the lease.

Shared Costs

In some instances, both parties negotiate and equally share specific costs, such as those for legal consultations, to ensure fairness and mutual satisfaction in proceeding with the transaction.

Both assignors and assignees must factor in these expenses to accurately assess whether a lease assignment is a financially viable option. It is advisable to consult with real estate professionals and legal advisors to understand all potential charges fully. Having a clear, upfront understanding of these costs allows both parties to make informed decisions, ensuring a smooth, transparent, and fair transition process.

Does Assignment Create a New Tenancy?

No, an assignment does not create a new tenancy. It merely transfers the existing tenant’s rights and obligations to the new tenant, who then steps into the shoes of the original tenant under the same lease terms.

The Necessity of Legal Assistance

It is highly advisable to engage a solicitor during the assignment of a lease. A solicitor can provide necessary legal advice, prepare the deed of assignment of lease, and ensure compliance with various property and contract laws.

Deed of Assignment vs Tenancy Agreement

While they might sound similar, a deed of assignment is not the same as a tenancy agreement. The former refers to the document transferring existing lease rights to a new tenant, while the latter is a contract outlining the terms between a landlord and tenant for new occupancy.

Parties Involved in Signing the Deed of Assignment

The deed of assignment of lease is typically signed by the outgoing tenant, the incoming tenant, and sometimes, the landlord, especially when their consent is a prerequisite for the lease transfer.

Landlord’s Consent to Lease Assignment

A landlord can refuse to consent to assign a lease, but this refusal must be reasonable. Scenarios for justifiable refusal might include the prospective tenant’s inability to meet financial commitments or proposed use of the property that violates lease terms.

Lease Assignment vs Subletting

• Lease assignment involves the complete transfer of the tenant’s rights to another party.
• Subletting occurs when the tenant temporarily hands over the property rights to another party but retains some rights or eventually plans to return.

Financial Responsibilities in Lease Assignment

Typically, the outgoing tenant or the incoming tenant covers the costs related to the assignment of lease, such as legal fees, administrative charges, and any leasehold improvements. The specific arrangements may vary based on mutual agreements.

Assigning a Lease Without a Deed: Is It Possible?

No, a lease assignment must be evidenced by a deed to be legally binding. The deed of assignment tenancy is crucial as it protects the interests of all parties involved and provides legal clarity.

The Meaning of ‘Assignment’ in Rent Context

In the context of renting, ‘assignment’ refers to transferring the existing tenant’s lease obligations and rights to another party. The assignee assumes responsibility for rent payments and adherence to the lease terms.

Advantages of Assigning a Lease

There are several benefits associated with the assignment of a lease, including:

• Flexibility for the tenant needing to vacate the property before lease termination.
• Minimal interruption in rent payments for the landlord.
• Opportunity for another tenant to occupy the premises without having to negotiate a new lease.

Stamp Duty and Lease Assignment

Stamp duty on assignment of lease may apply depending on the premium paid and the lease’s yearly rent. It’s important to consult a solicitor to understand any potential tax implications.

Post-Assignment Liabilities for Tenants

After the assignment of a lease, the original tenant is generally released from future liabilities. However, they may remain liable if the new tenant defaults, depending on specific lease terms or if guarantees were provided.

Essential Documents for Lease Assignment

In the process of a lease assignment, several critical documents must be prepared, reviewed, and signed to ensure a legally binding transfer of rights and responsibilities from the original tenant (assignor) to the new tenant (assignee). These documents are crucial in defining the terms of the assignment, protecting the interests of all parties involved, and complying with legal standards. Here are the essential documents required for a successful lease assignment:

1. The Original Lease Agreement

• Before any transfer, all parties must review the original lease. It’s vital to understand any clauses or terms that could impact the assignment, such as conditions requiring the landlord’s consent for any lease transfer.
• The original lease agreement serves as the foundation for the assignment, outlining the terms and obligations that the assignee will need to adhere to.

2. Deed of Assignment of Lease

• This legal document formally transfers the lease obligations from the assignor to the assignee. It must clearly state the terms under which the lease is assigned, including any continuing liabilities of the assignor, if applicable.
• It should be comprehensive, detailing the rights and responsibilities of all parties and any guarantees provided by the assignor.
• The deed is usually drafted by a solicitor to ensure that it complies with legal standards and adequately protects everyone’s interests.

3. Landlord’s Consent to Assignment

• Most leases require the landlord’s formal approval for any assignment to occur. This document is the landlord’s written agreement, permitting the transfer from the current tenant to the new one.
• It may come with conditions the assignee must satisfy, which should be clearly outlined in the consent form.

4. Assignee’s Letter of Acceptance

• This document is proof that the assignee understands and agrees to the terms set out in the original lease and the deed of assignment.
• The letter may restate key lease terms for clarity and will affirm the assignee’s commitment to abide by all the lease conditions and responsibilities.

5. Legal Advisories

• Though not a formal part of the lease assignment, documentation of legal advice received by both the assignor and assignee (and possibly the landlord) is crucial.
• These advisories ensure each party has been informed of their legal rights and obligations, potentially offering protection in the event of future disputes.

6. Inventory List

• If relevant, an inventory list detailing the condition of the property, especially for furnished rentals, would be necessary. This document helps manage expectations and responsibilities concerning the property’s state and contents at the time of the assignment.

7. Proof of Assignee’s Financial Stability

• While not always formally part of the assignment documentation, evidence of the assignee’s ability to meet financial commitments (like bank statements or employment confirmation) often needs to be submitted to the landlord during the assignment process.

The process of assigning a lease is a complex legal transaction that requires strict adherence to procedural standards. These essential documents ensure that the assignment progresses smoothly, with clear understanding and agreement from all parties involved. Both assignor and assignee should seek legal counsel to ensure their interests are protected, and all documents are in order, further underscoring the importance of each document’s role in this pivotal real estate process.

Energy Performance Certificate (EPC) Requirements

Yes, an EPC is generally required for a lease assignment, especially if the building is to be sold or rented out. This certificate ensures that the property meets the necessary energy efficiency standards.

Registering an Assignment of Lease

Registration of an assignment of lease is crucial. It validates the change of tenant under the lease, making it legally binding and enforceable. This process usually involves submitting the deed of assignment to the appropriate land registry.

Timeframe for Assigning a Lease

Assigning a lease can take anywhere from a few weeks to several months, depending on factors like obtaining the landlord’s consent, the new tenant’s credibility, and the speed of legal processes.

Embracing the Benefits of Lease Assignment

Whether you’re a tenant seeking flexibility or a landlord desiring continued occupancy, lease assignment offers solutions that can cater to your individual needs, promoting ease and continuity in the leasing process.

If you’re considering a lease assignment, it’s paramount to seek professional advice to navigate the complexities involved. The information contained in this article should be used for information purposes only and should not be relied upon in place of specific legal advice.

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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 rent payable over the terms of the lease (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 are the same rates applicable to purchases of freehold interests) as modified, if relevant, by the residential higher rates for purchases of additional dwellings by individuals or dwellings purchased by companies (see FA 2003, Sch 4ZA) and the increased rates for non-resident transactions (see FA 2003, Sch 9A).

For further information on the specific residential and non-residential

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Partner at Blick Rothenberg , Corporate Tax

20 years’ “Big Four” stamp duty experience, including building and running KPMG’s UK stamp duty team for five years Chair of the professional body for stamp duty advisers, the Stamp Taxes Practitioners Group (over 200 members) Editor and author of Sergeant and Sims on Stamp Taxes since 2008 Former Tax Writer of the Year Author of the Law Society’s SDLT Handbook: A Guide for Residential Conveyancers Fellow of the Chartered Institute of Taxation Barrister (non-practising) Listed in Spear’s 500

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Stamp Duty Land Tax (SDLT) on leases

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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. 

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Stamp duty, attestation and registration of lease and agreements

This article is written by Adv. Priscilla Rodrigues, pursuing a  Certificate Course in Real Estate Laws  from  Lawsikho.com .

Table of Contents

Introduction

Buying a house is one of the most important financial choices anyone can make in their lives. It is a daunting financial as well as emotional experience where we need to recognise the property during the purchase of a home, make a down payment, apply for loan, sign the selling agreement etc. Thereafter comes the possession which is the actual transfer of the property but this is not enough as we will need to provide patented legal proof. To do this, you would need to get the property registered in the local municipal records in your name, with the seller reporting that the property is being sold. You’ll also have to pay a stamp duty at the time of registration which is a government tax imposed on property transactions. 

A lot of people however prefer not buying their own house due to various reasons as it suits their own financial ambitions and the lifestyles that they enjoy. Owning a home leaves you vulnerable to unexpected spending and distractions nibbling away at what’s available for investment. It can also restrict your mobility and your independence.

With leasing, you’ve got a planned, stable cost that you can schedule throughout the year. You wouldn’t have to neglect or skip job opportunities that come your way.

So, when you’re looking for or living in a rented house, apartment, or home, the same needs to be registered and stamp duty needs to be paid on it.

Stamp duty on lease agreements

Stamp duties are payable pursuant to Section 3 of the Indian Stamp Act, 1899. It is a tax paid to the government, similar to the income tax. Stamp Duty is payable in full and is to be paid on the deadline. If payment of the stamp duty is delayed, it will incur a fine. A stamp duty paying instrument or document is deemed to be a legitimate and legal document and can be admitted as evidence in court. Any document that is not appropriately stamped, cannot be admitted as evidence in court.

Stamp duty shall be paid in the manner specified by the applicable stamp laws of the State in India where the property is situated for the execution of any lease agreement. According to the Constitution of India, the stamp duty on such instruments is a ‘state issue’ and therefore the applicable stamp duty can vary from state to state. 

In general, the stamp duty is paid on the basis of the term of the contract, the amounts of the rent, the premium, and/or any other form of rent and premium that may be specified in the proposed lease agreement. Minimum circle rates were also defined by the respective State Governments in some Indian states. In such states, either the specific rent specified in the lease agreement or the minimum circle rates provided by the applicable state government which will be much higher are expected to be paid stamp duty. 

Why are rent agreements registered

Section 17 of the Registration Act 1908 makes it compulsory to register a lease agreement Section 17(1)(d) leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent;

This makes it imperative that immovable properties from year to year or for any period exceeding twelve months require compulsory registration at the office of the Assurance Sub-Registrar with jurisdiction over the place where the property to be leased is located. Both the parties i.e. the tenant and the landlord must be present together with two witnesses for attestation in order to register the deed. If all parties are not present together, he/ she must sign the Power of Attorney, giving the agent the authority to sign the agreement. 

The Registration Act, 1908 makes an instrument that requires mandatory registration to be registered within four months from the date of its execution The Registrar can, at his discretion, issue an extension of an additional four months by imposing a penalty of up to ten times the registration fee, given that such failure to present the instrument within the first four months.

Apart from the mandatory requirement that a lease agreement should be registered it also forms an important aspect in a landlord-tenant relationship. It not only facilitates the relationship between the parties but also preserves their interests. The landlord and the lessee must never compromise for an oral contract as it is not protected by statute, and should thus always rely on a written agreement being enforced.

Why is the rent contract for 11 months

We must have noticed that mostly rent agreements are made for 11 months. We may even wonder why that is so. This is mainly done so that the stamp duty and other charges could be avoided. Under the Registration Act, 1908, registration of a lease agreement is compulsory if the lease term extends 12 months. If an agreement is registered, the parties will have to pay stamp duty and the registration fee. If the agreement is made for 11 months it could save a few extra bucks and the time that the entire process of registration would take. 

Stamp duty on rent agreement in UP and Gujarat

The provisions of the Registration Act, 1908 makes it imperative that all the Rental Agreements are registered if you are making it for more than one year. 

Uttar Pradesh  

The stamp duty payable is governed by The U.P. Stamp Act, 2008.

The stamp duty to be paid on rental agreements are as follows:

• If the lease is to be for a term not exceeding three years; then the Stamp Duty will be 2% of the Annual Rent.
• where the lease is for a term exceeding three years but not exceeding five years then the stamp duty will be 2% of consideration equal to three times the amount or value of the average annual rent reserved.
• where the lease is for a term exceeding five years but not exceeding ten years; then the stamp duty will be 2% of consideration equal to five times the amount or value of the average annual rent reserved.
• where the lease is for a term exceeding ten years but not exceeding twenty years; then the stamp duty will be 2% of consideration equal to ten times the amount or value of the average annual rent reserved.
• where the lease is for a term exceeding twenty years but not exceeding thirty years or does not purport to be for any definite term; then the stamp duty will be 2% of consideration equal to twenty times the amount or value of the average annual rent reserved.
• where the lease is for a term exceeding thirty years or in perpetuity; then the stamp duty will be the same as a duty for Conveyance for a consideration equal to the market value of the property which is the subject of the lease.

Registration of the agreement

Once the agreement is made and signed and if the lease is for less than a year then the document can be attested from the Notary Public and if the lease is for more than a year then it needs to be registered at the Local Sub-Registrar to make it legally enforceable in case of a dispute. A Registered rental agreement retains more evidentiary force compared to Notarized rental agreement.

Documents required for the registration process

• One Original Identity Proof of Owner and Tenant.
• Two Passport Size Photograph of each-Owner and Tenant.
• Two Witnesses with their Original Identity Proof.

The stamp duty payable in the state of Gujarat is governed by the Gujarat State Stamp Act, 1958, which was based on the Bombay Stamp Act, 1958.

• If the lease is made for a term which is between 1 – 5 years then the stamp duty payable will be 1.50% of the average annual rent reserved.
• If the lease is made for a term which is between 1 – 10 years then the stamp duty payable will be 3% of the average annual rent reserved.
• If the lease is made for a term which is between Lease deed 1 – 15 years then the stamp duty payable will be 6% of the average annual rent reserved.
• If the lease is made for a term which is between 1- 20 years then the stamp duty payable will be 6% of the average annual rent reserved.
• If the lease is made for a term which is above 20 years then the stamp duty payable will be 6% of the average annual rent reserved.

A rental agreement written on a Stamp paper is not enforceable if not registered at a Sub-Registrar Office. Thus, one is required to record the same with a Sub Registrar office to make it legally enforceable in case of a dispute.

When a rental agreement is signed, both the landlord and the occupant should maintain full fairness in the best interests of both the parties. 

The rental agreements can be registered after the occupant moves in but should not be postponed anyway. The agreement can be registered either online or physically at the sub registrar’s office in Gujarat.

The Documents required for the registration process in Gujarat is the same as those required in Uttar Pradesh as elaborated above.

If we look at all the applicable laws in the country, we can see that for all agreements to be valid and enforceable in the courts of law they need to be attested and stamped appropriately executed. The same tax, however, would be as under the laws of the respective State. Where e-stamping facilities are provided for by State legislation, the same shall be used to advance towards the aim of a paperless economy. Whereas the value and legitimacy of e-agreements and e-stamping has yet to be accepted by some Governments. Both the state and central government are looking forward to making clear arrangements for e-agreements and e-stamping with a view to saving time and money and making business simpler.

The Indian Stamp Act, 1899.

The Registration Act 1908.

The U.P. Stamp Act, 2008.

The Gujarat State Stamp Act, 1958.

https://www.edrafter.in/rent-agreement-gurgaon.

https://legaldesk.com/documents/rental-agreement/up-noida.

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RELATED ARTICLES MORE FROM AUTHOR

Manufacturing agreements decoded : insider tips for successful contracts, indian constitution and protection of tribal rights, offences under goods and services tax (gst) act, 2017.

UP Stamp Act 2008 is repealed by the Uttar Pradesh Stamp (Repeal) Act, 2019. However Schedule I-B, proviso to Article 35 (c) (i), which shall be applicable mandates that 2% stamp duty shall be payable where the lease purposes to letting of a building or flat for a term duly not exceeding five years.

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A Complete Guide on Stamp Duty Land Tax

Stamp Duty Land Tax (SDLT) was introduced by the Finance ACT of 2003, which imposes tax obligation on land transaction involving any estate, interest, right, or power in or over land in England and Northern Ireland. SDLT may be the first tax you would have paid as a landlord!

SDLT is a self-assessed tax on a process now and check later basis with compliance and rights of appeal. HMRC can initiate an enquiry into a land transaction return or an amendment to a return:

• without giving a reason;
• by giving a written notice to the purchaser;
• in the period from the date of receipt of the return or amendment to the return until the end of a defined period. The defined period is 9 months after the filing date if the return was delivered on or before that date. If delivered later, the end of the defined period is 9 months after the date on which the return or amendment was received.

For the purpose of SDLT, a chargeable consideration means anything given for the land transaction that is money or money's worth. Non-monetary chargeable consideration includes: -

• The release or assumption of debt
• Works and services
• The transfer of other property

Non-monetary consideration are valued at their market value.

SDLT is usually payable in the following situations:

• purchase of a freehold and leasehold property (including shared ownership);
• grant or assignment of a lease;
• transfer of property or land for consideration (we will explain this in detail later).

Stamp Duty Land Tax (SDLT) Rates

The SDLT rates are different depending upon whether the property is residential or commercial and freehold or leasehold.

SDLT Rates for Residential Property

FOR UK Residents

FOR Non-UK Residents

• If you're purchasing additional residential property, then this means that you'll own more than one home. Therefore, as shown above, you'll have to pay a 3% surcharge on top of standard SDLT rates.
• Suppose you're not present in the UK for at least 6 months during the 12 months before you purchase a residential property. In that case, you're not considered a UK resident for SDLT; therefore, you'll have to pay a 2% surcharge as shown above.
• The rates above are calculated under the 'slice' system instead of the 'slab' system. This approach is similar to income tax.

First-Time Buyers

Suppose you and the person you are buying with are first-time buyers of a residential property. In that case, a discount (relief) can be obtained if both conditions below apply:

• the property is purchased to occupy it as the main residence;
• the purchase price of the property is not more than £625,000.

You can also get comprehensive information from our  First Time Buyer Relief: Understanding Tax Credits and Deductions article.

New Leasehold Sales and Transfers

Suppose you're purchasing a new residential leasehold property. In that case, you'll have to pay SDLT on both the purchase price of the lease (using the rates above) and the value of the annual rent you pay (known as net present value).

Net present value is calculated on the total rent over the life of the lease.

The calculation is to be done separately and then added together.

Rates for Acquisitions by Non-Natural Persons

Non-natural persons include companies, partnerships, and collective investment schemes. The following rates apply if the residential property is acquired by non-natural persons:

However, relief from the 15% SDLT rate is available if the property is

• utilized in a property rental business;
• purchased by a property developer or property trader;
• utilized in a trade that includes making the property accessible to the public;
• purchased by a financial institution during lending;
• utilized by employees of the acquirer;
• a farmhouse;
• purchased by a qualifying housing co-operative.

Example 1 :

Calculation of SDLT on the purchase of a residential property

Purchase Price : £1.6 Million

Here, SDLT is calculated on the purchase of residential property as follows:

Hence, in the above example, you can clearly see that an additional 3% surcharge is levied if you purchase an additional residential property.

  Calculation of SDLT on the net present value of the rents in case of a residential lease.

Net present value = £350,000

Therefore, SDLT payable on the net present value of the rents is £1,000. However, you should not forget to calculate SDLT on the purchase price of the lease using the rates applicable.

SDLT Rates for Non-residential Property

What falls under non-residential property?

If your property has any of these elements, it is classified as a Non-Residential Property.

• commercial property such as shops or offices;
• agricultural land;
• any other land or property which is not used as a dwelling;
• six or more residential properties bought in a single transaction.

Rates for Freehold and New Leasehold Sales and Transfers

Freehold Sales and Transfers

new Leasehold Sales and Transfers

If you purchase a new non-residential property or mixed leasehold, then you'll have to pay SDLT on both the purchase price of the lease (using the rates above) and the value of the annual rent you pay (known as net present value).

Net present value is calculated on the total rent over the life of the lease. The calculation is to be done separately and then added together.

Calculation of SDLT on the purchase of a freehold non-residential property

Purchase price: £1.6 million

Here, SDLT is calculated on the purchase of non-residential property as follows:

Therefore, the total SDLT payable is £69,500.

Calculation of SDLT on the net present value of the rents in case of leasehold non-residential lease.

Here, Ted grants a new 15-year lease to Kio on 19 March 2019 commercial building, for which Kio agrees to pay an annual rent of £500,000, the net present value of which is £4,476,680.

Net Present Value = £350,000

Here, SDLT is calculated on the net present value of the rents in the case of the non-residential lease as follows:

Therefore, SDLT payable on the net present value of the rents is £43,627. However, you should not forget to calculate SDLT on the purchase price of the lease using the rates applicable.

SDLT Rates for mixed-use Property

A mixed-use property incorporates both residential and non-residential elements, for example, a shop with a flat above.

SDLT rates applicable for mixed-use property

SDLT rates for mixed-use property apply similarly to non-residential property except where multiple dwelling relief is available and limited to consideration apportioned to dwellings.

Stamp duty on Shares

Stamp duty is required to be paid on shares when such shares are transferred through a written document.

You usually have to pay stamp duty at 0.5% on the purchase of shares.

If you purchase shares electronically

Suppose you purchase shares electronically through the 'CREST' system (a computerized register of shares and shareowners). In that case, you'll pay Stamp Duty Reserve Tax (SDRT) at 0.5%.

The 0.5% Stamp Duty Reserve Tax (SDRT) is substituted by a higher one-time charge of 1.5% when chargeable securities are transferred (on sale or otherwise than on sale) to a depositary receipt issuer (or its nominee) or operator of a clearance service (or its nominee).

If you purchase shares using a stock transfer form

If you purchase shares using a stock transfer form, then you’ll pay stamp duty at 0.5% if the transaction is over £1,000.

Get the latest information about the SDLT Rates 2022/23 to make you ahead of everyone.

Exemptions Available for Stamp Duty on Shares

Yes, the purchase of some shares can be exempt from stamp duty when:

• shares are transferred as gifts for no consideration;
• shares are transferred on marriage/civil partnership or on divorce/dissolution of civil partnerships;
• shares held in a trust are transferred from one trustee to another;
• shares transferred back to you after being used as collateral for loan;
• shares transferred to you by someone in their will;
• shares transferred by the liquidator when a company is wound up;
• shares transferred by beneficiaries when a trust is wound up;
• shares admitted to recognized growth markets are transferred.

When to Pay SDLT and File Return?

There are usually two-state processes on any property transactions: exchange and completion. For SDLT, the date of the transaction is the date of completion and not the date of exchange, with some exceptions in complicated cases. Please note this is different from the rules for Capital Gains Tax, for which the date of transaction is the date of exchange.

SDLT must be paid and file SDLT return within 14 days from date of completion. If the SDLT return is not filed or pay SDLT within this time, HMRC will charge interest penalties.

There is a penalty of £100 for filing up to 3 months late and a penalty of £200 for being late more than 3 months. HMRC will also charge interest on late payment of tax. If the SDLT return is late by more than 12 months, HMRC can charge a penalty of up to 100% of the SDLT due.

Chargeable Consideration in Special cases

The SDLT is charged on the price paid to purchase the property or land in standard cases. However, in some special cases, the chargeable consideration must be clarified immediately. Chargeable consideration can be both monetary and non-monetary. Examples of non-monetary consideration are as below:

• Goods or services
• Carrying out works on land
• Release from a debt or transfer of debt

Also, in cases where VAT is chargeable on the property, the consideration includes VAT special amount as well. When consideration is dependent upon some future events ('contingent consideration'), the tax is payable on the assumption the future event will happen. For example, when an additional £1 million is payable on approval of planning permission, the SDLT is payable on £1 million on the assumption that it will happen.

There is a special rule when a company purchases from its connected person. In this case, the chargeable consideration is the market value of the land at the date of the transaction. For example, a property is transferred to a Limited company by its owner at incorporation. In this case, the chargeable consideration is market value even if it is transferred at nil value.

SDLT Exemptions

You don’t have to file return or pay the tax in the following cases:

• Property transferred at nil consideration
• Transfer because of divorce
• Freehold property purchased for less than £40,000
• Leasehold property with lease premium less than £40,000 and annual rent is less than £1000
• Property transferred as per will

SDLT Relief

Many landlords overpay stamp duty & land tax because they need to be aware of available reliefs. Here are few common types of reliefs available:

• Multiple Dwelling Relief (MDR) – available on the purchase of more than one dwelling in one transaction or linked transactions .
• Group Relief- available for the transfer of properties between companies within the same group
• Relief for complying with planning obligations-available to property developers
• Relief to charities
• Relief on incorporation of LLPs.

How Can UKPA help you?

If you require assistance on the calculation of stamp duty, we at UKPA, have a team of professionals that can help you with the calculation and legal requirements.

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NSW Land Registry Services

Registrar general's guidelines.

• Deposited plans
• Strata schemes
• Community schemes
• Water dealings
• Land dealings
• Common features
• Deeds Index Particulars
• Documents lodged
• Acknowledgment
• Agreements contracts
• Agricultural goods mortgages
• Bills of sale
• Book debts (assignment of)
• Causes, writs and orders of court
• Change of name - deed poll
• Conveyances
• General Frame
• Guardianships
• Memorials (Acts of Parliament)
• Power of attorney
• Re-registration
• Release or removal
• Resumptions and acquisitions
• Statutory declaration
• Survivorship
• RGs website change logs

Assignment of lease

ADIS Code -  LASS

An assignment of lease, including a sub-lease, is a transfer of the lease by the lessee, ie the assignor, to a new lessee, ie the assignee. The lessor is usually not a party to the assignment.

The affected lease or sub-lease is not required. For an assignment of a lease affecting Kosciuszko National Park .

Lodgment requirements

Stamp duty -  Required. If not marked Registration insisted upon , is prohibited.

Any alteration to the term or rent must be marked.

Registration copy - Required. If unacceptable, Registration insisted upon  is prohibited.

Statement of Title Particulars form  - Not required.

NOS form  - Not required.

Index Particulars form (completion)

(A) Lodging Party - Must be completed.

(B) Instrument - Lease - Assignment of

(C) Locality -  Not required.

Link Conveyance - Not required.

Principal Deed - The registered affected lease or sub-lease.

(D) Indexing -  The assignor and the assignee, and the sub-lessor for an assignment of a sub-lease.

(E) Certification -  Required.

Document requirements 

Date: must be dated with the date of execution. If not dated advise the lodging party. If a date is not furnished, indicate Registration insisted upon  and include the reason.

Name: the full names (initials are acceptable) of the assignor and the assignee are required. Advise the lodging party of any discrepancies in names.

Operative clause: "... hereby assigns...".

Principal Deed: the number of the affected lease or sub-lease as stated in the assignment must be identical to the number stated on the IPF. If affecting a sub-lease, the head lease number is also required.

Execution: by the assignor. A power of attorney must be registered, The assignee does not have to sign.

Attestation: required. Must be witnessed by a person of 18 years of age or older who is not a party to the document.

IPF: must be completed.

Staff processing information

A Deeds search may be made for the head lease number.

CA Not required

Locality: nil.

Link Conveyance: nil.

Principal Deed: required. The registered number of the lease or sub-lease being assigned, and the registered number of the head lease for an assignment of a sub-lease.

Noting: "Affecting [description of the land]".

If the assignment affects:

• an interest, state: "interest in" (or Noting Code: "I"
• a share, state: "[fraction] share"
• part of the land, state: "[affected land description]"
• the land description relies on an attached plan, state: "see attached plan" (or Noting Code: "PL").

V: the assignor, and the sub-lessor for an assignment of a sub-lease, deceased estates or trusts, and any variations thereof.

P: the assignee, deceased estates or trusts, and any variations thereof.

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Stamp-Duty: Assignments-of-Contracts-and-Leases

Stamp Duty is payable on any document described as:

• Transfer of Purchase Agreement
• Transfer of Lease

Or any other document which has the effect of legally passing a right in land under an Agreement or other document where an interest in land is being conveyed (except a Transfer of Land) from one person to another.

In order to assign a Purchase Agreement the original must first be Stamped.

Stamp Duty Assessment

This document may be subject to a Stamp Duty Assessment. The purpose of the Assessment is to establish the amount of ad-valorem Stamp Duty payable. If an Assessment is required, Duty is payable on the Consideration (purchase price) or Market Value, whichever is higher, and the Valuation Office will undertake a Market Valuation to establish the latter figure.

If, in the opinion of the Valuation Office, the Market Value is in excess of the Consideration then a Stamp Duty Assessment will be issued, outlining the Duty payable. The Assessment provides a window of opportunity for review, as there will on occasion be information affecting the value of which the Valuation Office is unaware. After that period has elapsed, the Stamp Duty will be assessed based on the Market Value established by the Valuation Officer.

In the event that the parties to the document continue to disagree with the Assessment issued, they may apply for the Stamp Duty to be adjudicated. By application to the Minister of Finance (and payment of prescribed fees), the assessment of Stamp Duty will be adjudicated as a binding decision (with limited right of appeal thereafter, upon payment).

Stamp Duty Rates

The rate of Duty payable is primarily dependant on whether possession of the property is granted under the Assignment. It is assumed that possession has been granted unless it is specifically or effectively excluded.

Where No Possession is Granted

The parties to the agreement may choose either of the Stamp Duty rates indicated. The option is irrevocable except by written application to the Minister of Finance, or if the Stamp Duty has not yet been applied to the document.

If the option to pay Fixed Rate Duty is exercised, ad valorem Duty still remains payable, and will be subject to an Assessment at the prevailing duty rate on the total consideration / market value based on the date of the Transfer of Land.

If the option to pay Ad-Valorem Duty is exercised, Stamp Duty must be paid within 45 days of the document becoming contractually effective, otherwise late submission Interest will be charged.

If the option to pay Ad-Valorem Duty is exercised, then providing the subsequent Transfer of Land is in conformity with the Assignment (eg. names of parties) and relates to the same property (eg. size of property), then no additional Duty will be payable on the Transfer of Land.

Where Possession is Granted

Stamp Duty must be paid within 45 days of the document becoming contractually effective, otherwise late submission Interest will be charged.

Providing the subsequent Transfer of Land is in conformity with the Purchase Agreement (eg. names of parties) and relates to the same property (eg. size of property), then no additional Duty will be payable on the Transfer of Land.

First Time Caymanian Purchasers

First Time Caymanian purchasers may qualify for a concession against Ad Valorem Stamp Duty payable under an Assignment.

Submission Requirements

In submitting a document for Stamp Duty you should enclose the following;

• Payment, based on the anticipated rate of Duty and the consideration paid (if applicable). If additional Duty is required you will be advised accordingly. Your election will be deemed based on the payment presented, unless otherwise stated.
• A chattels list, if a deduction for chattels is being made. Further guidance on the completion of a chattels list can be found here .
• Any waiver letter given from the Minister of Finance in relation to Stamp Duty.
• The date when the purchase price was agreed
• Any damage to the property
• Details of any other property which has been acquired as part of a larger transaction

If further information is required in order to undertake the Stamp Duty Assessment you will be advised accordingly.

Further Information

Pre 11 december 2012 assignments.

A number of Assignments dated prior to 11 December 2012 still remain valid. Specifically, these relate to properties where completion has not yet occurred, possession has not yet been granted, or where the Transfer of Land has not yet been executed. Differing Stamp Duty rates applied prior to 11 December 2012 and Assignments dated prior to this date will be assessed at an alternative rate of Duty if an ad valorem option is exercised or is mandatory. Late submission penalties would apply in such instances.

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• Business tax

Stamp Duty Land Tax Manual

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SDLTM12010 - Notification: Grant of a lease

When a lease is granted (or a notional lease is treated as having been granted –refer to SDLTM10045 ), it should be notified to HM Revenue and Customs (HMRC) on form SDLT1 (and form SDLT4 if necessary) where:-

• the lease (or deemed lease), when granted, is for a term of seven years or more and the grant is for chargeable consideration unless the chargable consideration other than rent is less than £40,000 and the relevant rent is less than £1,000 (refer to FA03/S77A and SDLTM11000 ) or
• the lease (or deemed lease) is for a term of less than seven years and tax is chargeable at a rate of 1% or higher on either or both of any premium or rent (or would be so chargeable but for the availability of a relief) (refer to FA03/S77A and SDLTM13000 ).

The return must be delivered to HMRC within 30 days of the effective date of the lease.For further details of effective date refer to SDLTM07600 to SDLTM07750. From 1 March 2019, a return must be delivered 14 Days of the effective date of the lease.

A 99-year residential lease is granted for a premium of £100,000 and annual rent of £500 on 1 July 2015.

Although there is no tax to pay (as the premium and net present value of rent are both below the then residential threshold of £125,000), the lease is:

• for seven years or more and
• for chargeable consideration including a premium of £40,000 or more. This means that the relevant rent being under £1,000 is not relevant in this case

so is notifiable.

This lease should be notified within 30 days of grant (by 31 July 2015).

A 1 year residential shorthold tenancy is granted for a rent of £600 per month on 1 July 2015. This lease is not notifiable, as:

• it is for a term of less than seven years, and
• tax is not chargeable at a rate of 1% or more on the consideration.

An agreement for a non-residential lease is entered into. The lease will be for 10 years from and including the date of grant of the lease, at a rent of £200,000 per annum. The tenant substantially performs the agreement by taking possession of the premises on 1 July 2015 and pays rent in accordance with the agreement at a rate of £200,000 per annum. In the agreement for lease, this payment may be expressed as a licence fee payable for occupation during the period prior to actual completion of the lease. For stamp duty land tax purposes it is treated as rent payable under a notional lease (refer to SDLTM11010 ).

As the date of actual grant is not known, this notional lease is treated as being for an indefinite term, so is treated as a lease for one year (refer to SDLTM14050 ).The net present value of the rent of this one-year lease is £193,236 and so is above the non residential threshold of £150,000.

A notional lease such as this must be notified if it meets the normal notification criteria. As this notional lease:

• is for a term of less than seven years, and
• tax is chargeable at the appropriate rate on the consideration
• it must be notified within 30 days of the effective date, in this case the date of substantial performance (by 31 July 2015).

Refer to SDLTM17010 for details of substantial performance of agreements for lease.

An agreement for a non-residential lease is entered into. The lease will be for 10 years from and including the date of grant of the lease, at a rent of £100,000 per annum. The tenant substantially performs the agreement by taking possession of the premises on 1 July 2015, and pays rent in accordance with the agreement at a rate of £100,000 per annum. In the agreement for lease, this payment may be expressed as a licence fee payable for occupation during the period prior to actual completion of the lease. For stamp duty land tax purposes it is treated as rent payable under a notional lease (refer to SDLTM11010 ).

As the date of actual grant is not known, the notional lease is for an indefinite term, so is treated as a lease for one year (refer to SDLTM14050 ).

A notional lease such as this must be notified if it meets the normal notification criteria.

The net present value of the rent of this 1 year lease is £96,618 and so is below the non residential threshold of £150,000. This notional lease does not have to be notified as:

• tax is not chargeable on the consideration.

An agreement for a non-residential lease is entered into. The lease will be for the period from and including the date of grant until 30 June 2025 at a rent of £100,000 per annum.The tenant substantially performs the agreement by taking possession of the premises on 1 July 2015 and pays rent in accordance with the agreement at a rate of £100,000 per annum.

In the agreement for lease, this payment may be expressed as a licence fee payable for occupation during the period prior to actual completion of the lease. For stamp duty land tax purposes it is treated as rent payable under a notional lease (refer to SDLTM11010 ).

The notional lease is for a fixed term of 10 years (from and including 1 July 2015 to 30 June 2025).

A notional lease such as this must be notified if it meets the normal notification criteria. As it is:

• for a term of seven years or more, and
• granted for chargeable consideration,

it must be notified within 30 days of the effective date, in this case the date of substantial performance (so by 31 July 2015).

Refer to SDLTM17010 for details of substantial performance of agreements for lease. Refer to SDLTM07600 to SDLTM07750 for details of effective date.

A residential 25-year lease is granted for rent of one peppercorn per annum.

Although the lease is for more than 7 years, there is no chargeable consideration (although a peppercorn is consideration, it is not considered chargeable consideration for the purposes of stamp duty land tax – refer to SDLTM11010 ).

Notification is therefore not required.

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