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HMRC internal manual

Stamp Duty Land Tax Manual

Notification: Grant of a lease: Example 6

An agreement or missives for a non-residential lease is/are entered into. The lease will be for the period from and including the date of grant (ie the date of last execution) until 30 June 2019 at a rent of £100,000 per annum. The tenant substantially performs the agreement by taking possession of the premises on 1 July 2009 and pays rent in accordance with the agreement at a rate of £100,000 per annum. For stamp duty land tax purposes it is treated as rent payable under a notional lease (see SDLTM18010).

In this case, because the end date is known, the term of the notional lease is certain.

The notional lease is for a fixed term of 10 years (from and including 1 July 2009 to 30 June 2019).

A notional lease such as this must be notified if it meets the normal notification criteria. As it is:

* for a term of seven years or more,
* is for chargeable consideration in excess of £40,000
* and the rent is not less than £1,000

it must be notified within 30 days of the effective date, in this case the date of substantial performance (so by 31 July 2009).

NB When the formal lease is granted (on the date of last execution of the formal lease), there is a deemed surrender of the notional lease. The formal lease runs from the date of last execution until 30 June 2019, i.e. it is shorter than the notional lease. Full overlap relief will therefore be available and will reduce the chargeable consideration for the formal lease to £nil. The formal lease will not therefore be notifiable.

See SDLTM19605 for details of substantial performance of agreements for lease.

See SDLTM18210 for details of effective date.