Reverse premiums on leases: do they count for stamp duty?
Reverse premiums and SDLT
A reverse premium is a payment that moves from landlord to tenant, assignor to assignee, or tenant to landlord on a surrender.
- It does not count for SDLT.
- The payment direction is crucial.
- Check the lease documents and any related agreement.
Scroll down for the full analysis.
Read the original guidance here:
Reverse premiums on leases: do they count for stamp duty?
When a landlord pays you while granting a lease, and does so to secure that grant rather than settle another part of the arrangement, the payment does not count for stamp duty land tax. Payment direction matters. When parties assign or surrender a lease, the rule can apply in the same way.
What this rule is about
A reverse premium is money that moves the opposite way from the payment people may expect in a lease deal. The landlord may pay the incoming tenant, rather than receive payment from that tenant.
That can happen where a landlord wants someone to take a lease, or where ending a lease needs an agreed payment.
What the official source says
HMRC’s manual says that a reverse premium does not count as the amount taxed for SDLT. The legislation gives the same result and sets out three situations.
- A landlord pays a tenant when granting a lease.
- The person transferring a lease pays the incoming tenant.
- A tenant pays a landlord when giving up a lease.
What this means in practice
When working out SDLT, leave the reverse premium out of the amount. Do not ignore every other part of the deal. Other payments may need separate consideration.
- Keep the agreement that explains the payment.
- Check who made the payment and who received it.
- Separate the reverse premium from any other sums in the deal.
How to analyse it
Start by identifying the legal event, because whether the parties grant, transfer, or surrender the lease determines which statutory description, if any, may apply to the payment. Then trace the money. Labels alone do not settle the point.
- Identify the type of lease transaction.
- Find the clause that requires the payment.
- Check the direction in which the money moves.
- Ask whether it fits one of the three statutory descriptions.
Example
Sam agrees to take a lease of an empty shop. To secure the deal, the landlord pays Sam £20,000 as the parties grant the lease of the empty shop, rather than asking Sam to pay that amount. It is a reverse premium. That £20,000 does not count for SDLT. Any separate sum Sam pays under the deal needs its own review.
Why this can be difficult in practice
Often, you must work out what the payment really is. A document may call it an incentive, contribution, compensation payment, or premium. Its name is not decisive.
- A payment outside the three listed situations may not qualify.
- A mixed payment may need to be split into its parts.
- Related agreements may explain the real reason for the payment.
Key takeaways
- Reverse premiums are excluded from SDLT.
- There are three defined lease situations.
- Follow the money, not just the label.
Technical analysis
For advisers, and for anyone who wants to check the law behind this page. You do not need this section to understand the guidance above.
Legislation
- FA 2003 Schedule 17A para 18 — reverse premiums excluded from the amount taxed
Official guidance
The pages below are HMRC’s guidance. Guidance is not law. It sets out how HMRC reads the legislation, and it is not binding on you, on a tribunal or on a court. Where guidance and the legislation differ, the legislation wins. HMRC can also change or withdraw guidance, and it may not cover your facts.
Where this is not settled
- Whether a payment is truly a premium moving in the required direction can depend on the lease documents and facts.
Evidence you would need
This kind of case is decided on the facts of the individual property. These are the records that usually settle it, and the ones an adviser would ask you for.
- The lease, assignment or surrender agreement
- The clause requiring the payment
- Payment records showing who paid whom and why
Explore this with an AI
Readers often want to test their own situation. Copy the prompt below into ChatGPT, Claude or Gemini. It hands the model the actual legislation for this page rather than letting it answer from memory, and tells it to be explicit about what is uncertain. What comes back is information, not advice – check it against the links above.
I am researching UK Stamp Duty Land Tax (SDLT), which applies in England and Northern Ireland. MY QUESTION Reverse premiums on leases: do they count for stamp duty? [Replace this with your own situation: what you are buying, the price, the dates, who the buyer is, and what you plan to do with the property.] THE LAW THIS TURNS ON - FA 2003 Schedule 17A para 18 - reverse premiums excluded from the amount taxed https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/18/2025-11-17 Guidance page from HMRC on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm11050 HOW I WANT YOU TO ANSWER 1. Work from the legislation above. Read it before answering. Guidance from HMRC is its view of the law, not the law, and does not bind a tribunal or a court. 2. Tell me what the rule actually requires, in plain English. 3. Tell me which facts decide the answer, and which facts would change it. 4. Tell me what evidence I would need to support the position. 5. Be explicit about anything unsettled or fact-sensitive. Do not guess. 6. Your training data has a cutoff and SDLT rates and reliefs change at fiscal events. Say so if you are not sure the law is current. POINTS ALREADY KNOWN TO BE UNCERTAIN ON THIS TOPIC - Whether a payment is truly a premium moving in the required direction can depend on the lease documents and facts. Do not give me a conclusion you cannot support from the provisions above.
Legislation links show Finance Act 2003 as it stood on 2025-11-17. The law may have changed since, and the rules that apply are those in force on the date of your transaction. The official guidance this page is based on is here.
This page was last updated on 31 August 2026
Useful article? You may find it helpful to read the original guidance here: Reverse premiums on leases: do they count for stamp duty?
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