Megan Harris is Associate solicitor in law firm Blandy & Blandy’s commercial property team
The simple answer to the question is yes. Stamp Duty Land Tax (SDLT) is payable on acquisitions of chargeable interests which include the grant, assignment or surrender of a lease and certain variations of leases. This blog article focuses on the grant of a lease.
How is SDLT calculated on the grant of a lease?
On the grant of a lease, SDLT is payable on the premium and/or the Net Present Value (NPV) of the rent for the term of the lease. There is a complex formula to calculate the NPV based on the rent payable and the term of the lease but HMRC’s SDLT calculator can be used for this by inputting the term of the lease and the rent for the first five years (including any VAT payable on the rent).
SDLT is charged on the NPV (for non-residential premises) at the following rates:
| NPV | Rate |
| Up to £150,000 | 0% |
| Over £150,000 but not more than £5 million | 1% |
| Over £5 million | 2% |
SDLT is charged on the premium (for non-residential premises) at the following rates:
| Premium | Rate |
| Up to £150,000 | 0% |
| Over £150,000, but not more than £250,000 | 2% |
| Over £250,000 | 5% |
If there is a premium and rent, the SDLT is calculated on both separately then added together.
There are some reliefs from SDLT which may apply, and you should seek advice if you think any may apply to your transaction. Different rules apply to leases of an uncertain period (for example periodic leases) and if there is more than one transaction that is linked to others (for example two leases between the same parties) the amount payable will be different.
If rent is uncertain or changes within first 5 years of the Lease
The SDLT return must make a reasonable estimate for the first five years if the rent is not certain. Once the rent becomes certain the NPV must be recalculated. An example of the types of rent these may apply to would be a turnover rent. You do not have to pay additional SDLT on solely RPI linked increases but if RPI forms part of a formula (e.g. RPI plus 1%) you will have to pay any increased SDLT.
If additional SDLT is payable, the tenant must submit a further return and pay the SDLT within 30 days of the date on which the rent became certain. If no SDLT return was needed originally but one is needed after the rent becomes certain then the deadline for payment and submission of the return is 14 days from the date that the rent became certain.
Deadline for SDLT return submission and payment
An SDLT return must be submitted and any SDLT must be paid to HMRC within 14 days of the effective date of the transaction (which is usually the completion date). Penalties and interest will apply for late filing and/or payment.
When is an SDLT return not required?
You do not have to submit a return or pay SDLT if you are granted a lease of:
- 7 years or more if the premium is less than £40,000 and the annual rent is less than £1,000; or
- Less than 7 years if the chargeable consideration (the premium and NPV) are less than the SDLT threshold.
