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HMRC internal manual

Stamp Duty Land Tax Manual

Miscellaneous provisions: Substantial performance of an agreement for lease or missives: Example 2

Missives for a non-residential lease are concluded on 1 July 2005 and are substantially performed on 1 August 2005 when the tenant takes entry. The lease is for a term of 5 years from and including 1 September 2005 at a rent of £90,000 per annum (which would be unusual in Scotland - it would be more commonplace in Scotland for the lease to be backdated). The lease is last executed on 1 December 2005. A return is required for the notional lease, the term of which is 1 August 2005 to 31 August 2010. The net present value (NPV) of the lease is £412,572 on which tax is £2,625.

The term of the notional lease is 5 years 31 days and the rent to be input into the NPV calculator for each of the first five years is £90,000. The highest rent is also £90,000 but is only payable for 31 days, so the rent for the final part year is just 31/365 x £90,000 = £7,643 which the calculator calculates automatically.

On the date of last execution of the lease, 1 December 2005, the notional lease is deemed to have been surrendered. The lease runs from the date of grant, 1 December 2005, to 31 August 2010. As this period is common to the notional lease, overlap relief applies for the entire term. As the rent payable is identical, the rent payable under the lease is taken to be nil. No land transaction return is required. If the lease requires registration, however, the Keeper will require production of the SDLT certificate issued in relation to the substantial performance of the missives.