Stamp duty when you grant a lease to your connected company
Connected-company leases and SDLT
When a company receives a lease and releases its owner’s debt, SDLT may depend on both market value and rent. HMRC’s lower-value example needs checking against the legislation that applied at the time.
- Check whether the owner and company are connected.
- Value the property at the SDLT effective date.
- Calculate rent separately using its NPV.
Scroll down for the full analysis.
Read the original guidance here:
Stamp duty when you grant a lease to your connected company
Granting a lease of a home to a company you control may mean that stamp duty uses the home’s market value rather than only the debt the company cancels. That can alter the SDLT result. Rent may also create a separate SDLT charge.
What this rule is about
When an individual grants a new lease, the company acquires a property interest. SDLT treats this as a land transaction. The company takes the lease, and the individual who owns the property grants it.
The question commonly arises when a company releases a debt owed by its owner. You may assume that the cancelled debt provides the full tax figure. It may not.
Why? Section 53 can apply if the individual and company are connected. It imposes a market-value floor on the amount used for SDLT.
What the official source says
HMRC’s manual includes an example in which an individual grants a residential lease to a company. In exchange, the company releases a debt of £170,000.
HMRC says you must first establish whether the individual and company are connected, then identify the property’s market value at the effective date, which will usually be completion. HMRC also says you must identify the rent details.
- Where they are not connected, HMRC says that the £170,000 debt release is the amount paid for the lease, rather than a market-value amount applied because of the relationship.
- HMRC says SDLT may also arise on the rent’s net present value, or NPV.
- NPV gives less weight to rent due further in the future.
- If they are connected, HMRC says section 53 brings market value into the calculation.
- In HMRC’s £275,000 illustration, it uses £275,000 for the property element and adds any SDLT on rent, which remains a separate part of the calculation.
What this means in practice
Connection matters because it may stop a connected company from relying on a low debt figure when the lease has a greater value. The law considers the relationship as well as the transaction itself.
You need to check two parts. One concerns what the company gives for the lease, such as debt release. The other concerns rent. Do not combine them into a single figure.
- Record the debt balance that the company actually releases.
- Get evidence of the home’s market value on the relevant date.
- Read the lease for rent, rent-free periods and later increases.
- Check who owns and controls the company.
- Use the SDLT rates that applied on the effective date, not a later rate table.
How to analyse it
Start with the legal steps rather than the label attached to the arrangement. Ask what the company receives, what it gives for that interest, and who controls it. Labels do not decide the result.
What determines the answer? The connection test comes first. The market value and the lease terms follow.
- Confirm that the individual grants a new lease to the company.
- Identify the effective date for SDLT.
- Check connection under the statutory rules for people and companies.
- Identify everything the company gives for the lease, including a debt release.
- Establish the market value of the lease subject matter at that date.
- Calculate the rent NPV under the rules for leases.
- Apply the rate bands that governed on that date.
Example
HMRC’s example uses a £170,000 debt. If A and company B are not connected, HMRC says the £170,000 debt release forms the property element of the SDLT calculation. Any tax on the rent comes on top.
When A and B are connected and the market value is £275,000, HMRC says it uses £275,000 for that element instead of the debt release. Calculate the rent separately using its NPV.
The manual also says that a market value of £150,000 limits that element to £150,000. That is the part to treat with care. The supplied wording of section 53 says the amount must be no less than market value. It does not, on its face, reduce a higher £170,000 debt release to £150,000.
Why this can be difficult in practice
This involves more than a valuation exercise. You need the correct value on the correct date, together with the right connection analysis. A company may be connected with an individual through control even when other people are named in the paperwork.
The manual also raises a real issue in its lower-value example. HMRC guidance is not law. The legislation takes priority if the two point in different directions.
- People often assume that cancelling a debt has no tax value. It can.
- People often look only at the debt and miss the market-value rule.
- A property valuation from the wrong date may not answer the SDLT question.
- Rent can produce SDLT even where the property element seems straightforward.
- The £150,000 statement in HMRC’s example needs legal-date checking before anyone relies on it.
Key takeaways
- A new lease to a company can trigger SDLT.
- Connection can bring market value into the calculation.
- Check the debt, valuation, rent and effective date separately.
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 43 — when a new lease counts as a land transaction
- FA 2003 section 53 — market value floor for connected company transactions
- FA 2003 Schedule 5 para 2 — tax calculation for rent under a lease
- FA 2003 section 119 — the date used for SDLT purposes
- an Act of 2010 we do not have an identifier for section 112 — when people and companies count as connected (no link: an Act of 2010 we do not have an identifier for)
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
- HMRC’s example says that a £150,000 market value limits the amount to £150,000, despite a £170,000 debt release. The supplied current wording of section 53 instead sets an amount that must be no less than market value. The result for a real transaction needs checking against the version of the law in force on its effective date.
- Whether an individual and a company are connected depends on the detailed statutory test and the ownership and control 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 and its completion date
- Documents showing the debt and its release
- Company ownership and control records
- A market valuation at the effective date
- The lease term and full rent schedule
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 Stamp duty when you grant a lease to your connected company [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 43 - when a new lease counts as a land transaction https://www.legislation.gov.uk/ukpga/2003/14/section/43/2025-11-17 - FA 2003 section 53 - market value floor for connected company transactions https://www.legislation.gov.uk/ukpga/2003/14/section/53/2025-11-17 - FA 2003 Schedule 5 para 2 - tax calculation for rent under a lease https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/2/2025-11-17 - FA 2003 section 119 - the date used for SDLT purposes https://www.legislation.gov.uk/ukpga/2003/14/section/119/2025-11-17 - an Act of 2010 we do not have an identifier for section 112 - when people and companies count as connected HMRC's guidance page on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm30222 HOW I WANT YOU TO ANSWER 1. Work from the legislation above. Read it before answering. HMRC guidance is HMRC's 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 - HMRC's example says that a £150,000 market value limits the amount to £150,000, despite a £170,000 debt release. The supplied current wording of section 53 instead sets an amount that must be no less than market value. The result for a real transaction needs checking against the version of the law in force on its effective date. - Whether an individual and a company are connected depends on the detailed statutory test and the ownership and control 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 1 September 2026
Useful article? You may find it helpful to read the original guidance here: Stamp duty when you grant a lease to your connected company
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