Guide on Leases, Agreements, Notional Leases, and Tenancy at Will

SDLT definitions for leases and occupation arrangements

HMRC treats leases, agreements for lease, notional leases and tenancy at will as separate SDLT concepts. This matters because SDLT can apply before a formal lease is signed, or where the law treats an arrangement as a lease based on its legal effect rather than its label.

• SDLT is not limited to freehold purchases and can also apply to leasehold and occupation arrangements.
• A lease, an agreement for lease, a notional lease and a tenancy at will must each be analysed separately.
• The key questions are what rights were granted, when they became legally effective, and whether occupation started before formal completion.
• Labels such as “licence” or “tenancy at will” are not decisive if the facts show a different legal arrangement.
• Early occupation, payment of rent and binding commitments can all affect whether SDLT is due and when.
• In practice, the SDLT outcome depends on the substance of the arrangement, including term, rent, possession and whether the rights are temporary or binding.

Scroll down for the full analysis.

SDLT definitions: leases, agreements for lease, notional leases and tenancy at will

This page explains a short HMRC contents entry that points readers to key SDLT definitions used for occupation and leasehold arrangements. These terms matter because SDLT does not only apply to straightforward freehold purchases. It can also apply to leases, arrangements that lead to leases, and some temporary occupation rights. Understanding which category an arrangement falls into is often the starting point for working out whether SDLT is in point and, if so, when.

What this rule is about

The source material is not a substantive rule in itself. It is a contents page within HMRC’s SDLT manual that groups together several important concepts:

• leases
• agreements for lease
• notional leases
• tenancy at will

These concepts sit near the beginning of the SDLT analysis because SDLT looks at land transactions broadly. A person may acquire a major interest in land by taking a lease, not just by buying the freehold. In some cases, the law may also treat an arrangement as if a lease exists, even if the parties have not used that label.

The practical question is usually: what exactly has been granted or agreed, and when did that happen for SDLT purposes?

What the official source says

The official source simply identifies four topics within the definitions section of the SDLT manual:

• leases
• agreements for lease
• notional leases
• tenancy at will

Although this particular page contains no detailed explanation, its structure shows that HMRC treats these as distinct concepts that need separate analysis. That is important. In SDLT, similar-looking occupation arrangements can have different tax consequences depending on their legal character.

What this means in practice

If a transaction involves occupation of land, future rights to occupy, or a temporary arrangement before formal completion, you should not assume it is irrelevant for SDLT until the final lease is signed.

In practice, these categories often matter in the following ways:

• A lease is itself a chargeable land transaction if it falls within the SDLT rules.
• An agreement for lease may have its own significance, especially where it creates binding rights before the formal lease is granted.
• A notional lease suggests that the SDLT legislation may deem a lease to exist in certain circumstances, even where the legal documentation is unusual or incomplete.
• A tenancy at will usually raises the question whether the occupier has only a temporary, revocable right to occupy, or whether the facts really show a lease or something equivalent.

For conveyancers, landlords, tenants and advisers, the point is that SDLT analysis depends on substance and legal effect, not just on the heading used in the paperwork.

How to analyse it

A sensible starting framework is:

• Identify the land right being granted. Is it present occupation, a future right to call for a lease, or a temporary permission to occupy?
• Check whether there is a completed lease, only an agreement for lease, or some arrangement that the legislation may treat as a lease.
• Look at timing. Ask when the arrangement became legally effective and whether possession was given before formal completion.
• Review the terms of occupation. Is there a defined term, rent, exclusive possession, or only a temporary and uncertain arrangement?
• Do not rely only on labels. A document called a “licence” or “tenancy at will” may need closer analysis if the facts point another way.
• Place the arrangement in the wider SDLT framework. Once you know what the transaction is, you can then consider chargeability, effective date, rent, premium and filing consequences.

This page does not itself provide the legal tests for each category, but it signals that each one should be considered separately.

Example

Illustration: a business agrees heads of terms for a 10-year occupation of commercial premises. The parties allow early occupation before the formal lease is completed, and the occupier starts paying sums described as rent. At that point, the SDLT question is not answered simply by saying “the lease has not been signed yet”. You would need to consider whether there is already an agreement for lease, whether the occupation is only a tenancy at will, or whether the facts amount to something that SDLT treats as a lease or notional lease.

Why this can be difficult in practice

These issues are often fact-sensitive because property transactions do not always proceed in a neat order. Parties may exchange side letters, allow early access, defer formal completion, or use temporary occupation wording while negotiating final documents.

The main difficulty is that commercial language and legal effect do not always match. A temporary arrangement may genuinely be a tenancy at will, but in other cases the surrounding facts may indicate a more substantial right. Equally, an agreement for lease may be more than a statement of intention if it creates binding obligations.

This means SDLT analysis often turns on the actual rights created, the timing of occupation, and whether the arrangement is intended to be temporary, conditional or legally binding.

Key takeaways

• SDLT can apply to more than a completed freehold purchase or signed lease.
• Leases, agreements for lease, notional leases and tenancy at will are separate concepts and should not be conflated.
• The correct SDLT treatment depends on the legal effect of the arrangement and when it takes effect, not just on the label used by the parties.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guide on Leases, Agreements, Notional Leases, and Tenancy at Will

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