Stamp Duty Land Tax (SDLT) - in
relation to the grant of leases
This is calculated by multiplying the
length of the lease by the annual known rent (plus vat if applicable) and then
applying a 'temporal discount'. The result is called the Net Present
Value (NPV) and the Tenant has to pay Stamp Duty Land Tax at the rate of 1% on
the amount by which the NPV exceeds £150,000. This is payable within 30 days
of the 'effective date' - generally speaking this means the date of
completion. The best way of calculating the NPV is to use a tool provide by
HM Revenue and Customs - click here
Stamp Duty Calculator.
For the rent you use the highest known rent in the first 5 years. If there
is a rent review during the first 5 years then once that has taken place a
further SDLT return is required and any further tax due has to be paid. Rent
reviews (other than abnormal ones) after the first 5 years are ignored.
The £150,000 'tax free' allowance
mentioned above relates only to the NPV calculated on the grant of leases. It
does not apply to any premium charged on the grant of a lease or the
premium paid for the assignment of a lease, transfer of a freehold or any
other transaction.
It is necessary to complete a return and
submit this to HM Revenue & Customs. The main form is SDLT1 and sometimes a
supplementary form SDLT4 see HMRC: Stamp
Duty Land Tax. You will see that from the same page you can get
guidance notes.
An SDLT1 is not required where the term
of the lease does not exceed 7 years and there is no tax payable (ignoring any
relief's that may be available). Bear in mind that the term of any previous
SDLT lease is taken into account. If there as a previous SDLT lease then
that would be considered as a linked transaction.
If you have any concerns about this
you should refer to the HMRC web site at
http://www.hmrc.gov.uk/sdlt/index.htm
or telephone their help line on 0845 603 0135
The above is a very brief summary
of the main SDLT requirements in relation to the grant of commercial leases. If
you need more information you should check with HM Revenue & Customs. The
assignment of leases is dealt with differently - unless there is no
consideration for the assignment then an SDLT1 will be required (even if there
is no tax to pay)
HM Land Registry
If the term of the lease granted exceeds
7 years then the lease needs to be registered at HM Land Registry. This
is done using form AP1 which can be downloaded for free from the Land Registry web site
http://www.landregistry.gov.uk/. There is a fee charged by HM Land
Registry which is based on the amount of the rent
Note also that the Land Registry
require evidence of identification for any unrepresented party to any
application for registration that is lodged. This is done by completing form
ID1. Form ID1 can be downloaded for free from the Land Registry web site.
The form is required for each party to the application i.e. in connection
with the registration of a lease this would mean both the landlord and the
tenant .
