Surrender and Grant of Lease: Example 5 – Archived Information

SDLT and lease variations: surrender and regrant

When an existing lease is changed, the law may treat this as the old lease ending and a new lease being granted, even if the parties call it a variation. If that happens, SDLT may need to be reconsidered for the new lease, although the supplied source does not give the full facts of HMRC’s archived example or any precise tax result.

• A change to a lease that increases the term, the rent, or both can amount to a surrender and regrant for SDLT purposes.
• If there is a deemed new lease, the SDLT position is tested afresh by reference to the new lease terms and any other chargeable consideration.
• The key issue is the legal effect of the changes, not just the label used in the document.
• The archived HMRC material does not include the facts or outcome of “Example 5”, so only the general principle can be taken from it.
• The tax regime depends on the location of the property: SDLT for England and Northern Ireland, LBTT for Scotland, and LTT for Wales.

Scroll down for the full analysis.

SDLT and lease variations: when a surrender and regrant can arise but no tax is payable on the rent

This page is about a very narrow SDLT point that can matter when an existing lease is replaced with a new one on changed terms. In some cases, the law treats this as the old lease being surrendered and a new lease being granted. The archived HMRC material referred to as “Example 5” sits within that context. Although the source text here is minimal, the issue usually matters because a deemed new lease can trigger a fresh SDLT analysis.

What this rule is about

Under SDLT, a lease is taxed by reference to the chargeable consideration for the grant of that lease. If an existing lease is effectively given up and replaced with a new one, the tax position is not simply a continuation of the old lease. Instead, the new arrangement may need to be tested as a new land transaction.

The archived HMRC heading indicates a situation where:

• an existing lease is surrendered, or treated as surrendered,
• a new lease is granted, and
• the new lease increases the term, the rent, or both.

That matters because extending the lease term or increasing the rent can change the SDLT result. A transaction that looks like a lease variation in commercial terms may, for SDLT purposes, be treated as a new lease.

What the official source says

The source provided is only the title of HMRC manual page SDLTM18805 and an archival note stating that, from April 2015, SDLT no longer applies to land transactions in Scotland, which are instead subject to Land and Buildings Transaction Tax.

From that, two points can safely be taken:

• the page formed part of HMRC’s SDLT manual dealing with surrender and regrant of leases where the term and/or rent is increased, and
• the page is archived because Scottish land transactions moved out of SDLT and into LBTT from April 2015.

The source as supplied does not include the actual facts or conclusion of “Example 5”. So it is not possible to state the precise numerical outcome or factual pattern of that example from this material alone.

What this means in practice

The practical point is that changing an existing lease is not always tax-neutral. If the changes are substantial enough in law to amount to a surrender and regrant, SDLT may need to be reconsidered from the start for the new lease.

In practice, the main questions are usually:

• Has the old lease ended and a new one begun, either expressly or by operation of law?
• Has the term been extended?
• Has the rent increased?
• Is there any premium or other chargeable consideration?
• Which tax regime applies: SDLT, LBTT, or LTT?

If the land is in England or Northern Ireland, SDLT may still be relevant. If the land is in Scotland, SDLT ceased to apply to land transactions from April 2015 and LBTT applies instead. For Wales, land transactions are now subject to LTT rather than SDLT.

How to analyse it

A sensible way to approach this kind of lease change is as follows.

• Identify the property and jurisdiction. The archived note is a reminder that the tax code depends on where the land is and when the transaction took place.
• Work out whether the parties have merely varied the existing lease or whether the legal effect is a surrender and regrant.
• If there is a new lease, identify its term and the rent payable under it.
• Check whether any premium, reverse premium, or other consideration is involved in addition to the rent.
• Apply the SDLT lease rules to the new lease, rather than assuming the old lease treatment simply carries on.
• Check whether any special transitional or jurisdiction-specific rules apply.

The critical legal issue is often not what the parties call the document, but what the arrangement does in law. A document described as a “variation” can still amount to a surrender and regrant if the changes are of the kind that produce that result.

Example

Illustration: a tenant has a lease with several years left to run. The parties agree to replace it with a new lease over the same premises for a longer period and at a higher annual rent. Even if the deal is presented commercially as an extension or update, the tax analysis may need to ask whether the old lease has been surrendered and a new lease granted. If so, SDLT is considered by reference to the new lease terms.

The supplied source does not contain the facts of HMRC’s “Example 5”, so this illustration is only a general explanation of the type of issue that page appears to address.

Why this can be difficult in practice

The difficulty is often classification. Parties may think they have simply amended an existing lease, but the legal effect may be more significant. Whether a change in term or rent produces a surrender and regrant can be technical and fact-sensitive.

There is also a separate difficulty with older HMRC manual material: it may be jurisdiction-specific and time-specific. The archival note here is important. A reader must not assume that an SDLT manual example applies unchanged to Scotland after LBTT began, or to Wales after LTT began.

Finally, a manual heading on its own does not provide the full legal answer. The legislation, and where relevant case law, determine the position. HMRC manual material explains HMRC’s view, but it is not itself the law.

Key takeaways

• A lease change that increases the term or rent may need to be analysed as a surrender of the old lease and grant of a new one.
• If there is a new lease for SDLT purposes, the tax position must usually be reconsidered on the basis of that new lease.
• The supplied source is archived and does not include the actual example facts, so any conclusion must be limited to the general SDLT issue it identifies.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Surrender and Grant of Lease: Example 5 – Archived Information

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