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HMRC internal manual

Stamp Duty Land Tax Manual

Miscellaneous Provisions: Substantial performance of an agreement: Example 1


A non- residential agreement for lease is exchanged on 1 January 2015 and is substantially performed on 1 February 2005. The term of the lease is 10 years from the date that the lease is to be granted (which is not known) at a rent of £210,000 per annum. There is a rent review to market rent at the end of the fifth year. The lease is subsequently granted on 1 May 2015.

The agreement for lease is for an indefinite term so is notifiable as a notional lease for a term of one year (1 February 2015 to 31 January 2016) no later than 2 March 2015 (30 days after substantial performance). 

On the date of grant of the lease, 1 May 2015, the notional lease is regarded as having been surrendered. Notification of the grant of the lease must be made no later than 31 May 2015. The term of the lease to be notified is 1 May 2015 to 30 April 2024. As the rent review occurs at the end of the fifth year it is not taken into account for the NPV calculation (refer to SDLTM13160)

There is an overlap period that runs from 1 May 2015 to 31 January 2016 that is common to the notional lease and the lease, for which ‘overlap’ relief is due (refer to SDLTM16010).

Overlap relief is not a claimed relief and is not obtained by answering yes to Question 9 on a land transaction return. In this case it would be obtained by reporting only the rent payable in the first year of the lease for the period from 1 February 2016 to 30 April 2016. That is the part of the first year of the term of the lease that is not common to the notional lease. The rent payable in year 1 for the purpose of the NPV calculation is £51,205 (£210,000 x 89/365). The rent for the remainder of the term for the purpose of the NPV calculation is taken as £210,000.