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Have You Been Hit by Stamp Duty on Your Lease?

Stephensons Solicitors LLP has issued a warning to individuals and companies in lease agreements that they could be subject to action from the Inland Revenue if they avoid stamp duty on their lease or simply don’t realise that it is payable.


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Stephensons Solicitors LLP has issued a warning to individuals and companies in lease agreements that they could be subject to action from the Inland Revenue if they avoid stamp duty on their lease or simply don’t realise that it is payable.

Stamp Duty Land Tax
(SDLT) is sometimes payable on a lease in the same way it would be a standard property purchase, and the amount payable is determined by the Net Present Value (NPV) of the lease. Often, SDLT is only applied to medium and long term leases with relatively high rental values, but even in these instances, the persons involved can be ignorant of it.

There are circumstances when SDLT can become payable during the terms of a lease and it is important to always be aware of this since the Inland Revenue are becoming more and more aggressive in their pursuit of SDLT payments, regardless of the reasons that the payments are missed.

By not paying SDLT correctly when it is owed, persons would be liable to pay the sum of tax and additional fines; and the Inland Revenue can query returns up to 21 years after they are due, which means that the problem will not go away.

The experts at Stephensons Solicitors have published a breakdown of the common requirements surrounding SDLT on leases, which include:

  • Rent Review – Where rent reviews take place within the first 5 years of tenancy or where a rent increase is abnormal an additional SDLT payment needs to be filed. It is advisable to seek advice on the SDLT implications of a rent review from a professional who can advise definitively if payment is required.
  • Lease Expiry and Holding Over – If an individual remains in a residence after an original lease expires the terms of the lease extend by a year, and any previously payable SDLT will remain payable. Again, advice should be sought before the expiry of a lease.
  • Lease Renewals – A commercial tenant is entitled to a new lease upon expiry of the original unless expressly excluded from the Landlord and Tenant Act 1954. Lease renewals can have SDLT implications which should be discussed with a professional.
  • Lease Extensions – Extending a lease is actually treated as a surrender and re-grant. SDLT may be payable on the value of the re-granted lease.
  • Breaking a lease – If a person pays SDLT for the entire term of a lease, but choose to break the lease early, they will not be entitled to money back from the Inland Revenue.

For more information on Stamp Duty Land Tax contact the Stephensons’ commercial real estate team today on 0333 344 4776 or visit www.stephensons.co.uk



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 Stephensons Solicitors
 Stamp Duty Land Tax
 SDLT


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