When a partnership lease can be ignored for SDLT
Market-rent leases and SDLT
A lease can be left out of relevant partnership property when a partnership interest changes hands, but only if all four conditions in paragraph 15 are met.
- No payment other than rent, including under prior arrangements
- Market rent when the lease begins
- Regular market-rent reviews for leases over five years
- No later reduction of rent below market level
Scroll down for the full analysis.
Read the original guidance here:
When a partnership lease can be ignored for SDLT
When someone buys into, or increases their share in, a partnership, they may leave a lease held by that partnership out of part of the stamp duty calculation. This can matter where the partnership owns land. The lease must pass four strict tests. A cheap rent or a hidden payment can stop the exclusion.
What this rule is about
Some partnership changes count as land transactions for SDLT. The law examines their value. After the change, it examines the value of certain land and lease interests held by the partnership for the SDLT calculation.
The law calls that property relevant partnership property. Although it is a technical label, it identifies property whose value helps determine the amount that enters the SDLT calculation when the partnership interest changes. The label matters.
A normal commercial lease may be different. If it is a genuine market-rent lease and meets every condition, paragraph 15 says it is not included in that group of property.
This does not make the whole deal free of SDLT. It only removes that lease from this part of the calculation.
What the official source says
HMRC’s manual explains the exclusion in Finance Act 2003. The law applies it to both Type A and Type B partnership transfers under paragraph 14. All four conditions must be met.
- No payment other than rent must have been given for the grant of the lease.
- There must be no arrangement, when the partnership share changes, for a later payment other than rent.
- The starting rent must have been a market rent when the lease was granted.
- A lease lasting five years or less meets the length condition.
- A longer lease must provide for a rent review at least once in every five years.
- After each required review, the lease must require market rent from the review date.
- No later change can leave the rent below market level.
Market rent is the rent that, at that time, a lease could reasonably be expected to obtain if offered on the open market between willing parties. Evidence is essential. A review date is the date from which the reviewed rent is payable.
What this means in practice
The key question is not merely whether the document bears the label lease, but whether the arrangement is a genuine market-rent deal with no extra value transferred outside rent. Substance decides.
For example, an upfront premium can matter even if the written rent looks normal. So can an agreement to make a later payment. The legal term is chargeable consideration, which here means value given for the grant apart from rent.
- Check for premiums, rebates and payments made outside the lease.
- Check side letters and informal promises, not only the signed lease.
- For a long lease, check the timing and wording of every rent-review clause.
- Check every later change to the rent or lease terms.
- Keep evidence showing why the rent was at market level.
This is the part people can miss: a lease that started at market rent can lose the exclusion later if it is changed so that the rent falls below market rent.
How to analyse it
Start with the partnership change. Then work through the lease facts in date order. Do not assume that a low rent is harmless because the partners agreed it between themselves.
- Is there a transfer of an interest in a partnership to which paragraph 14 applies?
- Was the lease held for the partnership business immediately after that transfer?
- Was any value other than rent given for granting the lease?
- Was any such payment planned or understood, even if no binding contract existed?
- What was the open-market rent when the lease began?
- Is the term five years or less?
- If not, does the lease require market-rent reviews at least every five years?
- Has any later variation reduced the rent below market level?
One failed condition is enough. In that case, the lease is not excluded by paragraph 15 and may form part of the property considered under paragraph 14.
Example
Amir joins a property-investment partnership. Immediately after he joins, the partnership holds a five-year shop lease at £24,000 a year. No premium was paid. There is no side deal for any other payment, and valuation evidence supports £24,000 as the open-market rent when the lease began.
On those facts, the lease meets the four conditions and is left out of relevant partnership property. Now change one fact: the partners later vary the lease, cutting the rent to £18,000 when market rent is still £24,000. The fourth condition is no longer met after that change takes effect.
Why this can be difficult in practice
Market rent is a question of evidence, not a label written into a lease. A rent may look commercial but still be below what the open market would pay.
Documents can also tell only part of the story. The statute uses a wide meaning of arrangements. An agreement or understanding can count even if nobody could enforce it in court.
- Calling a payment something other than a premium does not settle its SDLT treatment.
- A rent-free period or concession may need careful review against the actual lease terms.
- A review clause is not enough if it does not require market rent after the review.
- Long leases need reviews at the required frequency throughout their term.
- Changes made after the lease starts can be as important as the original document.
Key takeaways
- A qualifying market-rent lease can be excluded from this partnership SDLT calculation.
- Every one of the four statutory conditions must be met.
- Market value evidence, side deals and later rent changes are often decisive.
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 15 para 14 — type a and type b partnership transfers; leases excluded from partnership property value calculation; property included for type b partnership transfers
- FA 2003 Schedule 15 para 15 — market-rent lease exclusion and its four conditions
- FA 2003 Schedule 15 para 34 — meaning of property held for partnership business
- FA 2003 Schedule 15 para 40 — wide meaning of arrangements in partnership rules
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 rent is the amount the lease could reasonably fetch on the open market will often need valuation evidence.
- A side letter, concession or informal understanding may be an arrangement or a change to the lease, depending on the facts.
- The supplied legislation is current only to 17 November 2025. Transactions after that date need a current-law check.
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 lease and every variation, side letter and rent concession
- Evidence of any premium, reverse premium or other value linked to the grant
- A market-rent valuation at the grant date and, where needed, each review date
- The partnership agreement and documents showing the change in partnership shares
- Evidence that the lease was held for the partnership business immediately after the transfer
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 When a partnership lease can be ignored for 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 Schedule 15 para 14 - type a and type b partnership transfers https://www.legislation.gov.uk/ukpga/2003/14/schedule/15/paragraph/14/2025-11-17 - FA 2003 Schedule 15 para 14 - leases excluded from partnership property value calculation https://www.legislation.gov.uk/ukpga/2003/14/schedule/15/paragraph/14/2025-11-17 - FA 2003 Schedule 15 para 14 - property included for type b partnership transfers https://www.legislation.gov.uk/ukpga/2003/14/schedule/15/paragraph/14/2025-11-17 - FA 2003 Schedule 15 para 15 - market-rent lease exclusion and its four conditions https://www.legislation.gov.uk/ukpga/2003/14/schedule/15/paragraph/15/2025-11-17 - FA 2003 Schedule 15 para 34 - meaning of property held for partnership business https://www.legislation.gov.uk/ukpga/2003/14/schedule/15/paragraph/34/2025-11-17 - FA 2003 Schedule 15 para 40 - wide meaning of arrangements in partnership rules https://www.legislation.gov.uk/ukpga/2003/14/schedule/15/paragraph/40/2025-11-17 HMRC's guidance page on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm34040 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 - Whether rent is the amount the lease could reasonably fetch on the open market will often need valuation evidence. - A side letter, concession or informal understanding may be an arrangement or a change to the lease, depending on the facts. - The supplied legislation is current only to 17 November 2025. Transactions after that date need a current-law check. 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: When a partnership lease can be ignored for SDLT
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