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HMRC internal manual

Stamp Duty Land Tax Manual

From
HM Revenue & Customs
Updated
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Calculation of stamp duty land tax: Deposit & loan arrangements

Under the provisions of FA03/SCH17A/PARA18A, where a tenant makes a loan or pays a deposit (whether to the landlord or to a third party) the repayment of which is contingent on anything to be done or not to be done by the tenant:-

* the amount of the loan or deposit is to be treated as consideration other than rent (premium) paid by the tenant for the grant of the lease
* except where the amount of the deposit does not exceed twice the relevant maximum rent (being the highest rent payable in respect of any continuous 12 month period during the first five years of the term of the lease).

The same provisions apply to loans made or deposits paid by an assignee in connection with the assignment of a lease. In this case the relevant maximum rent is the highest rent payable in respect of any continuous 12 month period during the first five years of the term remaining outstanding as at the assignment date.

Stamp duty land tax (SDLT) is calculated on the full amount of this notional premium, gross of any repayment of the loan or deposit.

Where a charge to tax would arise under these provisions merely because the 0% band is excluded for a relevant rental figure exceeding £ 1,000 per year, no tax is chargeable. The figure of notional premium is added to any actual premium paid and only if this exceeds the relevant (residential or non-residential) 0% threshold is the notional premium chargeable to SDLT.