Stamp Duty

Stamp Duty

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Hopefully a quick couple of questions to put my mind at ease - we're in the process of taking on the remaining portion of an existing lease on a commercial property  and I want to make sure we get our stamp duty calculation correct. Firstly, I'm pretty sure this is an assigned lease, so I need to calculate the 'premium' as per HMRC. My interpretation is that this would be the annual rent x number of years that we take on, based on the following http://www.hmrc.gov.uk/manuals/sdltmanual/sdltm11045.htm . Seems crazy that HMRC would get stamp duty twice (i.e. once from us, and once on the original lease), but I guess I'm not that surprised really.

Secondly, I read that I'd need to include VAT on the annual rent in calculating the premium. Is this correct?

Any assistance on either of the above would be most helpful.

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By Alastair Johnston
18th Jun 2014 14:17

If you are taking on the remaining portion of an existing lease then that is an assignment.  But your transaction might be the grant of a sub-lease for the remaining duration of the existing lease (minus one day).  Check this first, as you seems a little unclear. 

The normal rule on taking an assignment of a lease is that SDLT is payable only on the premium (plus VAT).  The rule you refer to, where the SDLT is based on the rent and the unexpired duration of the lease, applies only when the original grant as the lease was free of SDLT by virtue of one of a number of reliefs, including group relief, charities relief, and sale and lease back relief. 

If the lease was granted before SDLT came into effect on 1 December 2003, then that should be apparent because the lease ought to have been stamped.  In this case you pay SDLT only on the premium.  If the lease was an SDLT lease, then ask to see the SDLT return form so you can see if it was subject to relief.  If it was, then you pay SDLT on the premium and the rent.  If it was not, then you pay SDLT only on the premium. 

VAT is part of the chargeable consideration for SDLT so you always have to include it in calculating the SDLT. 

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Replying to nigel_price:
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By jimmyjazz
18th Jun 2014 14:59

Thank you Alastair, very helpful and much appreciated. To follow up on your points, the original lease was granted post 1 Dec 2003. I'm almost certain it's an assignment, our agreement will be directly with the landlord (and so the current tenant is dropping out of the equation).

What I'm a little confused on is the definition of premium (thanks to HMRC), but logically it would make sense if it was the rental we will be paying less the rent that was previously charged on the original lease? If so, this makes a huge difference to chargeable consideration! In simple terms, I have our property manager saying stamp duty is based upon the total rent due over the term of the lease, but given this is the assignment of a lease I don't believe their methodology is correct.

Thanks again.

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By Alastair Johnston
18th Jun 2014 15:21

The premium is ...

... the lump sum you pay to the assignor for the lease.  Ignore the rent.

Rent only matters if you have an abnormal rent increase, which is broadly a 100% rent incrase at 5-year review, or similar 20% p.a. (straight line) after more than 5 years.  That is a separate charge to SDLT and a very rare beast. 

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By JCresswellTax
19th Jun 2014 09:18

Just following on from this

Whats the SDLT position if there is no lease premium? 

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By Alastair Johnston
19th Jun 2014 15:24

None!

No assignment premium, no SDLT (and no return to do either). 

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