Linked shop leases where one lease was granted before SDLT
Linked leases and older stamp duty leases
HMRC’s historic example shows how a lease granted before SDLT began can still affect SDLT on a later linked shop lease.
- Combine the leases’ rent NPVs.
- Calculate tax on the combined figure using the historic rate in force.
- Allocate that tax by each lease’s share of the combined NPV.
Scroll down for the full analysis.
Read the original guidance here:
Linked shop leases where one lease was granted before SDLT
An earlier lease that began before SDLT can still increase the stamp duty calculation for a later linked lease. In HMRC’s historic shop example, the earlier lease pays no SDLT itself. Yet its rent value helps set the SDLT due on the later lease.
What this rule is about
Rent on a commercial lease can also attract stamp duty. For this purpose, SDLT uses the rent’s net present value, usually called NPV. This calculated value reflects rent across the whole lease term.
Normally, each lease stands alone. When the same parties, or connected parties, use leases as one scheme, arrangement, or series, and an earlier lease falls outside SDLT, the law can treat their rent values together. It then considers the linked leases as a whole.
That distinction can change the bill. Even where one lease falls outside SDLT, it can affect a later SDLT lease if both form part of one commercial plan. This can increase the later calculation.
What the official source says
In an historic example, HMRC’s manual describes two non-residential shop leases, with shop 1 beginning on 1 November 2003 before SDLT applied and shop 2 beginning later on 1 June 2005. Both dates matter.
These are different premises. So the example does not use the special rule for successive linked leases of the same, or almost the same, premises. Instead, HMRC says the facts show one scheme under the linked-transactions rule.
- Shop 1 has an assumed NPV of £80,000.
- Shop 2 has an assumed NPV of £120,000.
- The combined NPV is therefore £200,000.
- The historic calculation applies a nil rate to the first £150,000.
- It applies 1% to the remaining £50,000.
- This gives total tax of £500 before apportionment.
Because shop 1 is outside SDLT, HMRC still includes its assumed NPV in the combined figure when applying the linked-transactions rule to shop 2. HMRC requires that inclusion.
HMRC’s manual notes that a calculator cannot work out the NPV for a pre-SDLT lease. Someone must calculate it manually.
What this means in practice
When leases are linked, the later lease takes a proportion of the tax calculated on both leases together rather than using only its own rent value. Its own share then applies. The proportion matches that lease’s share of the combined NPV.
Here, shop 2 represents £120,000 of the £200,000 total. That is 60%. Shop 2 therefore carries 60% of the £500 tax bill: £300.
- Shop 1 represents 40% of the combined NPV.
- Its share of the £500 total is £200.
- Shop 1 has no SDLT consequence because it was a stamp duty lease.
- Shop 2 represents the remaining 60%.
- SDLT due for shop 2 is £300.
- The manual gives 1 June 2005 as shop 2’s effective date for notification.
This is the part people may miss: no SDLT arises on the old lease, but it still pushes the later lease above the historic threshold used in the example.
How to analyse it
Start with the dates. Then test the commercial links between the leases before doing any arithmetic. Calling leases separate does not settle the issue.
- Identify every lease that may belong to the arrangement.
- Check when each lease began and whether SDLT applied at that date.
- Check whether the same parties, or connected parties, took part.
- Look for one scheme, arrangement, or series of transactions.
- Check whether the leases cover the same or substantially the same premises.
- Work out the NPV for each lease’s rent.
- Add the NPVs for all leases that must be linked.
- Apply the rates in force on the later lease’s effective date.
- Share the resulting tax by each lease’s proportion of the total NPV.
Keep the date-sensitive parts separate. Although the old lease may fall outside SDLT while the later one falls within it, the earlier lease can still affect the later calculation. That remains possible.
Example
Suppose a landlord grants a lease of shop 1 before SDLT starts. Its manually calculated NPV is £80,000. Later, the landlord grants the same tenant a lease of shop 2. Its NPV is £120,000. Although the leases cover different shops, the facts show one commercial scheme.
For both leases, the combined NPV is £200,000. Using the historic rates in HMRC’s example, the first £150,000 produces no tax and the remaining £50,000 produces £500 of tax at 1%. Shop 2’s share is £120,000 divided by £200,000, or 60%. SDLT on shop 2 is therefore £300.
Why this can be difficult in practice
Once you identify the correct leases, including any earlier lease outside SDLT that forms part of the same scheme, arrangement, or series, the sums are straightforward. Arithmetic is not usually the issue.
Instead, the hard question is often whether the leases really form one scheme. That needs evidence, not assumptions.
- Different addresses do not automatically mean the leases are unlinked.
- Separate documents do not automatically mean separate commercial arrangements.
- A pre-SDLT lease may need a manual NPV calculation.
- Historic rates must not be replaced with current rates.
- The special successive-lease rule is not the same as the general single-scheme rule.
HMRC’s page gives an example, not a complete test for every lease arrangement. Records, timing, and commercial purpose of the parties can all matter.
Key takeaways
- An old stamp duty lease can affect SDLT on a later linked lease.
- For linked leases, calculate tax from the combined rent value first.
- This historic example does not state current SDLT rates.
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 section 108 — when transactions form a single linked scheme
- FA 2003 section 56 — tax calculation where lease payments include rent
- FA 2003 Schedule 5 para 2 — linking lease rent values and sharing tax
- FA 2003 Schedule 17A para 5 — treatment of successive linked leases over same premises
- FA 2003 Schedule 19 para 2 — when a transaction can fall within SDLT
- FA 2003 Schedule 19 para 7 — earlier stamp duty transactions linked with SDLT
- FA 2003 section 119 — the effective date of a land transaction
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 separate leases form one scheme depends on the full facts, including the parties, connections between them, and the commercial arrangements.
- The source gives assumed net present values but not the lease terms or rent figures used to reach them.
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 signed leases and any agreements linked to them
- Details of the landlord, tenant, and any connected parties
- The rent, term, review provisions, and start date for each lease
- Records showing whether the leases formed one commercial arrangement
- The stamp duty position for any lease granted before SDLT began
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 Linked shop leases where one lease was granted before SDLT [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 section 108 - when transactions form a single linked scheme https://www.legislation.gov.uk/ukpga/2003/14/section/108/2025-11-17 - FA 2003 section 56 - tax calculation where lease payments include rent https://www.legislation.gov.uk/ukpga/2003/14/section/56/2025-11-17 - FA 2003 Schedule 5 para 2 - linking lease rent values and sharing tax https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/2/2025-11-17 - FA 2003 Schedule 17A para 5 - treatment of successive linked leases over same premises https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/5/2025-11-17 - FA 2003 Schedule 19 para 2 - when a transaction can fall within SDLT https://www.legislation.gov.uk/ukpga/2003/14/schedule/19/paragraph/2/2025-11-17 - FA 2003 Schedule 19 para 7 - earlier stamp duty transactions linked with SDLT https://www.legislation.gov.uk/ukpga/2003/14/schedule/19/paragraph/7/2025-11-17 - FA 2003 section 119 - the effective date of a land transaction https://www.legislation.gov.uk/ukpga/2003/14/section/119/2025-11-17 Guidance page from HMRC on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm17065 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 separate leases form one scheme depends on the full facts, including the parties, connections between them, and the commercial arrangements. - The source gives assumed net present values but not the lease terms or rent figures used to reach them. 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 1 September 2026
Useful article? You may find it helpful to read the original guidance here: Linked shop leases where one lease was granted before SDLT
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