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HMRC internal manual

Stamp Duty Land Tax Manual

Miscellaneous Provisions: Substantial performance of an agreement

 

An agreement for lease does not give rise to a charge to stamp duty land tax unless the agreement is substantially performed before the lease is granted. Refer to [ 

An agreement for lease does not give rise to a charge to stamp duty land tax unless the agreement is substantially performed before the lease is granted. Refer to](https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm07850) to SDLTM07950 for what is meant by substantial performance.

Under FA03/SCH17A/PARA12A, where an agreement for lease is substantially performed in advance of completion, it is treated as the grant of a notional lease. The effective date is the date of substantial performance and the term is from and including that date to the end date specified in the agreement. Where it is not possible to identify the end date of the term (for example a term may be expressed to be a number of years from the date that a building is certified as being ready for occupation) the notional lease is treated as being for an indefinite term (refer to SDLTM14050). A land transaction return may be required in respect of the notional lease together with payment of any tax due within 30 days of the effective date (see SDLTM00310).

When a lease pursuant to the agreement is granted, the treatment varies depending on the date of grant.

Actual Lease granted on or after 17 July 2013

Where the lease is granted on or after 17 July 2013 the notional lease and actual lease are treated as a single lease, granted on the date of substantial performance of the agreement for lease, for a term beginning on that date and ending at the end of the term of the actual lease. The consideration for that single lease will be the total rent and any other chargeable consideration given for the notional lease or the actual lease (paragraph 12A(3), Schedule 17A).

The notional lease and the actual lease will be regarded as linked transactions. If this results in further tax being payable, a return for the notional lease or a further return for the actual lease would be due but otherwise the grant of the actual lease will not be notifiable.

Actual lease granted before 17 July 2013

Where the lease was granted prior to 17 July 2013 the transaction would have been regarded as the surrender of the notional lease and a re-grant. Relief would have been available in respect of the rent payable in the overlap period (FA03/SCH17A/PARA9; refer to SDLTM16010) and a further return would have been required if there was extra tax to pay. The linked transactions provisions in FA03/SCH5 dealing with a single scheme or arrangement would most likely have applied.