Reverse Premiums in Leases: SDLT Changes for Scottish Land Transactions

Reverse premiums on leases and SDLT

A reverse premium is a payment from a landlord to a tenant to encourage the tenant to take a lease or accept certain terms. For SDLT, this is different from a normal lease premium paid by the tenant, so it does not usually count as the tenant’s chargeable consideration. The main test is the real substance of the payment and the wider transaction.

• A reverse premium is money paid by the landlord to the tenant in connection with the grant of a lease.
• It is not treated in the same way as a normal lease premium paid by the tenant to the landlord.
• For SDLT, the key question is whether the payment is actually consideration given by the tenant for the lease.
• You should check what the payment is really for, including whether it is a true inducement, a reimbursement, or part of a wider exchange of value.
• Rent, any premium paid by the tenant, linked transactions, and side agreements must still be reviewed under the usual SDLT rules.
• The guidance is relevant to England and Northern Ireland, and to older Scottish transactions before SDLT was replaced there by LBTT in April 2015.

Scroll down for the full analysis.

Reverse premiums on leases and SDLT

This page is about so-called reverse premiums in lease transactions. In simple terms, a reverse premium is a payment made by a landlord to a tenant in connection with the grant of a lease. The archived HMRC material indicates that, for SDLT purposes, these payments are not treated in the same way as an ordinary lease premium paid by a tenant to a landlord. This matters because SDLT is charged on chargeable consideration, so the first question is whether a reverse premium forms part of that consideration at all.

What this rule is about

Most people think of a lease premium as money paid by the tenant to the landlord for the grant of the lease. SDLT rules commonly focus on that kind of payment, together with rent.

A reverse premium is the opposite. It is a payment moving from landlord to tenant, usually to induce the tenant to take the lease or to accept particular lease terms. The legal issue is whether that payment counts as chargeable consideration for SDLT on the lease transaction.

The source material sits within HMRC’s guidance on chargeable consideration and lease premiums. Its subject is narrow: it flags the treatment of reverse premiums rather than setting out a full code.

What the official source says

The official page is headed “Chargeable Consideration: ‘Premium’ payments for lease: Reverse premiums”. The source provided is very limited and does not set out detailed reasoning on the page itself. However, its placement within the SDLT manual indicates that HMRC treats reverse premiums as a distinct issue from ordinary lease premiums.

The important underlying point is that SDLT is concerned with consideration given for the land transaction. A payment by the landlord to the tenant is not, in the ordinary sense, consideration given by the tenant for the acquisition of the lease. That is why reverse premiums need separate treatment.

The archived notice also makes clear that, from April 2015, SDLT no longer applies to land transactions in Scotland, which are instead subject to LBTT. So any SDLT guidance on this page is relevant to England and Northern Ireland, and to older Scottish transactions where SDLT still applied.

What this means in practice

If a landlord pays a sum to a tenant as an inducement to enter into a lease, that payment is not the same thing as a lease premium paid by the tenant. In practical SDLT terms, the existence of a reverse premium does not automatically increase the tenant’s chargeable consideration.

The practical analysis is usually:

• identify who is paying whom;
• identify what the payment is for;
• separate a true inducement payment from sums that may in substance discharge the tenant’s obligations or form part of a wider exchange of value;
• consider the rest of the lease transaction, especially rent, any tenant premium, and any linked arrangements.

This matters because labels can mislead. Calling something a “premium” does not decide its SDLT treatment. What matters is its legal and commercial substance.

How to analyse it

A sensible way to approach the issue is to ask the following questions.

• Is the payment actually made by the landlord to the tenant? If so, it may be a reverse premium rather than chargeable consideration given by the tenant.
• Is the payment an inducement to take the lease, or is it really reimbursement, funding, or satisfaction of some liability that should be analysed differently?
• Are there reciprocal obligations that change the picture? For example, is the tenant giving something else of value in return beyond simply taking the lease?
• Does the lease also involve rent or a conventional premium from the tenant? Those elements still need to be considered under the normal SDLT rules.
• Are there linked transactions or side agreements that affect the overall consideration analysis?

The key point is that SDLT looks at chargeable consideration for the land transaction. A payment flowing in the opposite direction is not usually chargeable consideration simply because it is connected with the lease.

Example

A landlord wants to fill a vacant commercial unit and agrees to pay a new tenant £50,000 if the tenant takes a 10-year lease. The tenant pays no premium, but rent is payable under the lease.

On those basic facts, the £50,000 is a reverse premium: money paid by the landlord to the tenant as an inducement. It is not an ordinary lease premium paid by the tenant. The SDLT analysis would therefore focus on the actual chargeable consideration given by the tenant, such as rent, rather than treating the landlord’s inducement payment as if it were consideration paid by the tenant.

This is only an illustration. If the payment were tied to other obligations, or if the tenant were effectively providing something separate in return, the analysis could become more complex.

Why this can be difficult in practice

The source material provided is brief, and real transactions are often more complicated than the label “reverse premium” suggests.

Difficulties commonly arise where:

• the landlord’s payment is mixed with fit-out contributions, capital allowances arrangements, or reimbursement of works;
• documents use the word “premium” loosely, even though the payment does not function like a premium for SDLT purposes;
• there are side agreements that may amount to separate consideration;
• the transaction includes linked steps, incentives, or obligations that need to be analysed together.

Another practical difficulty is jurisdiction. The source page is archived and expressly notes that SDLT ceased to apply to Scottish land transactions from April 2015. So readers must first check whether they are dealing with SDLT, LBTT, or LTT, and whether the timing of the transaction affects which regime applies.

Key takeaways

• A reverse premium is a payment by a landlord to a tenant in connection with a lease.
• That is not the same as a lease premium paid by the tenant, so it does not automatically form part of the tenant’s chargeable consideration for SDLT.
• The real issue is the substance of the payment and the wider transaction, not the label used in the documents.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Reverse Premiums in Leases: SDLT Changes for Scottish Land Transactions

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