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HMRC internal manual

Stamp Duty Land Tax Manual

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HM Revenue & Customs
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Notification: Grant of a lease: Example 3

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 July2005 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 commercial 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 a rate of 1% or higher 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 2005).

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