HMRC SDLT: SDLTM11070 – Chargeable Consideration: Surrender of a lease
Principles of Chargeable Consideration in Lease Surrender
This section of the HMRC internal manual provides guidance on the concept of chargeable consideration when surrendering a lease. It outlines key principles and considerations for determining tax obligations.
- Explains the definition of chargeable consideration in the context of lease surrender.
- Details the calculation methods for determining the chargeable amount.
- Discusses exemptions and reliefs applicable to certain lease surrenders.
- Provides examples to illustrate the application of these principles.
Read the original guidance here:
HMRC SDLT: SDLTM11070 – Chargeable Consideration: Surrender of a lease
SDLTM11070 – Chargeable Consideration: Surrender of a Lease
This guidance covers when a new lease is granted after giving up (surrendering) one or more existing leases. It explains how stamp duty land tax (SDLT) applies in these situations.
Understanding Lease Surrender and Grant
When a lease is surrendered, it means that the tenant gives up their rights to the property under that lease. In some cases, the tenant may receive a new lease in exchange for surrendering the old one. Here’s how this works:
- If a tenant surrenders one or more leases (these can be on the same property or different properties) and then receives a new lease for consideration, the new lease is not considered chargeable for stamp duty.
- Similarly, the act of surrendering a lease does not count as chargeable consideration when receiving a new lease.
This rule applies even if the landlord pays the tenant to give up the lease, as this payment itself would be subject to SDLT. However, any release from the tenant’s obligations due to the surrender is not considered chargeable for SDLT purposes.
For more information about obligations and implications related to lease surrender, refer to section SDLTM11060.
Surrendering Part of a Lease
If only part of the lease is surrendered, this still counts as a surrender under the applicable SDLT rules. This could be relevant in situations where the tenant wants to keep some rights while relinquishing others.
Deemed Surrender and Regrant
In some situations, a lease may be considered as surrendered and then granted back as part of an SDLT assessment. This is known as a deemed surrender and regrant. Further details on this concept can be found in section SDLTM17080.
Important Conditions for Transactions
The rules detailed here only apply when the lease surrender and the subsequent grant happen between the same parties. For instance:
- Consider the scenario where Tenant A surrenders their lease to Landlord B, and then Landlord B grants a new lease to Tenant A. This situation qualifies under the conditions laid out.
- If, however, Tenant A surrenders the lease to Landlord B, and then Landlord B grants the new lease to both Tenant A and another party (say, Tenant C), this situation does not qualify for the exemption.
In summary, it’s important that the grant and surrender happen between the same involved parties for the specific SDLT treatment rules to apply.
Examples for Clarity
Here are a few examples to illustrate the concepts discussed:
- Example 1: Tenant A has a lease on Property X. Tenant A surrenders this lease to Landlord B. The landlord then issues a new lease back to Tenant A for Property X. In this case, no stamp duty applies to either the surrender or the new lease.
- Example 2: Tenant A surrenders their lease on Property Y to Landlord B, and Landlord B grants a new lease on Property Y to both Tenant A and Tenant C. Here, the conditions for exemption are not met because Tenant C is also involved in the new agreement.
- Example 3: If Tenant D only surrenders part of their lease for Property Z and retains some rights, this still counts as a lease surrender and is treated under the same provisions.
Additional Considerations
It’s also worth noting that these rules do not change the fact that other payments made during these transactions could still attract stamp duty. For example, if the landlord pays the tenant a sum of money as part of the agreement for the lease surrender, that payment will likely be taxable under SDLT, but not as part of the surrender itself.
When managing lease agreements and understanding SDLT, it is wise to consult with a tax professional, especially when other parties or complex arrangements are involved. This ensures that all potential tax liabilities are considered and appropriately addressed.