HMRC's Stamp Duty Land Tax (SDLT) Manual sets out when a new lease and the surrender of an existing lease do not count as chargeable consideration for each other, where both involve the same parties.
Key facts
- Who: Parties to a lease surrender and regrant, where SDLT chargeable consideration is in question
- From: Already in force
- Source: SDLTM11070 – Chargeable Consideration: Surrender of a lease
HMRC's Stamp Duty Land Tax Manual section SDLTM11070 explains what counts as chargeable consideration when a lease is surrendered. It relies on paragraph 16 of Schedule 17A to the Finance Act 2003.
The general rule
Where a lease, or more than one lease, is granted in consideration of the surrender of one or more existing leases between the same parties, two things follow. The grant of the new lease does not count as chargeable consideration for the surrender. The surrender does not count as chargeable consideration for the grant of the new lease. The existing and new leases may be of the same premises or of different premises.
Other payments
The rule applies even if other consideration is given for the surrender. An example is a payment by the landlord to the tenant to procure the surrender, which is itself chargeable to SDLT. However, the release of any tenant's obligation is not chargeable consideration in relation to the surrender. The manual refers to SDLTM11060 for further details.
Partial surrenders and deemed surrenders
Where only part of the subject matter of a lease is surrendered, this is treated as the surrender of a lease for the purposes of paragraph 16. The same provisions also apply where there is a deemed surrender and regrant for SDLT purposes. The manual points to SDLTM17080 for more on that.
Same parties only
The provisions apply only where the two transactions are between the same parties. The manual's example is a surrender from A to B and a regrant from B to A. They do not apply where another party is involved. A surrender from A to B and a regrant from B to A and C would not meet the conditions.
What this means for people negotiating a lease surrender and regrant
The manual shows that the identity of the parties matters. The treatment it describes covers a surrender and regrant between the same parties. It does not cover a regrant that involves another party.
It also distinguishes the exchange of leases from any other payment made for the surrender, which the manual says may itself be chargeable to SDLT. Check your documents, and get advice on the SDLT position before any deadline passes.
Sources
- HMRC, SDLTM11070 – Chargeable Consideration: Surrender of a lease, Stamp Duty Land Tax Manual