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HMRC internal manual

Stamp Duty Land Tax Manual

HM Revenue & Customs
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Chargeable Consideration: 'Premium' payments for lease

The term ‘premium’ is not used in stamp duty land tax (SDLT) legislation, despite being a common term for consideration for a lease. Instead the legislation refers to:

* chargeable consideration which ‘consists of or includes rent’ (defined at [SDLTM18010]( and
* ‘consideration other than rent’, i.e. a premium, sometimes referred to as a grassum.

Consideration given by a tenant to a landlord for the grant of a lease will be charged to SDLT as a premium unless it is by way of rent (or otherwise exempt from charge). Note that where the tenant pays the landlord’s legal fees in connection with the grant of a lease, this does not count as a premium.

Chargeable consideration for the grant of a lease which is in respect of a period before the lease is granted is not rent for SDLT purposes, even if it is described as such, but may be taxed as a premium.

Premium payments for a lease are charged to SDLT in the same way as other chargeable consideration, at a fixed percentage rate depending on the amount.

Where both a premium and rent is payable for the grant of a lease, the tax due on the two elements of consideration will be calculated separately and added together to determine the total SDLT payable. For leases of commercial or mixed property, no nil rate band is available in relation to the premium if the average annual rent is more than £1000 per annum. For leases of residential property, however, there is a nil rate band.

For treatment of consideration in respect of pre-grant periods, see SDLTM17110.

For further details of how SDLT is calculated on premiums, see SDLTM18410 and FA03/S55.

See SDLTM18455 onwards for details of how SDLT is charged on rents.