stamp duty on lease assignment

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Do You Pay Stamp Duty on a Commercial Lease?

SDLT on commercial leases can be very complex. Many tenants are unaware that Stamp Duty Land tax is payable on commercial leases – and may be hit with a penalty, as well as the full amount owed with interest if they fail to pay the tax on time.

Due to the complexity of the application of SDLT on commercial leases, there are also many circumstances where tenants mistakenly overpay the tax. If this is the case, it is possible to reclaim overpaid SDLT from HMRC, although this process can also be complicated.

If you are negotiating a commercial lease, seeking legitimate savings on SDLT or are attempting to reclaim overpaid tax, using an experienced Stamp Duty Land Tax barrister is highly recommended.

Patrick Cannon has over 35 years of experience working as an SDLT lawyer – first as a solicitor and latterly as a barrister. His in-depth knowledge of the intricacies of this field of tax law makes him the ideal choice to manage, advise and represent private and corporate clients in all aspects of SDLT on commercial leases. For more information, contact Patrick Cannon here .

Do I have to pay stamp duty on a commercial lease?

If you are a tenant of a commercial property, it is your responsibility to calculate and pay SDLT on the lease on time. Landlords bear no responsibility for SDLT on the lease.

For commercial tenants, SDLT may be payable on any of the following elements of your commercial lease: • Grant • Assignment • Variation • Surrender

SDLT is not payable on all commercial leases, however – and for this reason, it is highly recommended that you instruct a specialist tax lawyer or accountant to review your liability for the tax.

How to calculate stamp duty on a commercial lease?

As mentioned, calculating Stamp Duty on a commercial lease is complex, and while it is possible to use an online calculator, the calculators do not allow for all the complexities that may arise and so it is advisable to consult a tax lawyer or accountant who is well versed in handling commercial SDLT.

The SDLT rate is based on any lease premium paid by the tenant and on the rent due under the terms of the lease (including VAT if applicable).

The amount of ‘rent due’ is based on the first 5 years of rent payments. If the lease is longer than 5 years, the ‘rent due’ is based on the highest amount paid over a 12-month period during the first 5 years.

Once the length of the lease is factored in, the Net Present Value (NPV) of the lease can be calculated, and the amount of SDLT owed is based on this figure.

SDLT can also be applied to certain other payments made under the terms of a lease, and also to ‘chargeable considerations’, such as a commercial tenant’s obligations to carry out work or services on a rented property.

When Does Stamp Duty Land Tax Need To Be Paid?

SDLT needs to be paid within 14 days of the ‘effective date’ of the transaction. This could be the date of completion of the transaction, the moving-in date, or when the main part (‘substantial performance’) of the transaction has taken place.

Frequently Asked Questions

Do you have to pay stamp duty on a commercial lease extension.

Lease extensions may give rise to additional SDLT, however, neither the surrender of the old lease nor the grant of the new lease are regarded as ‘chargeable consideration’. It is always worth confirming your liability with a tax barrister or solicitor before you commit to a lease extension and to ensure that you are not missing the deadline for SDLT payment.

Is Stamp Duty the Same for leases on Residential, Mixed and Commercial Properties?

No – SDLT rates for residential vs Commercial property leases are different and the rates for residential leases can be found here.

SDLT rates for non-residential leases are as follows:

Are There Exemptions on Paying SDLT for a Commercial Lease?

Yes – you are exempt from paying SDLT if you are granted a commercial property lease of more than seven years, while the premium is under £40,000 with the annual rent of less than £1,000. There are other exemptions for SDLT on commercial leases, including leasebacks and extensions.

How Patrick Cannon Can Help?

Patrick Cannon is a highly experienced tax barrister and leading expert on SDLT . With his in-depth knowledge of the nuances of this complex area of tax law, Patrick is able to advise on all aspects of commercial lease SDLT, as well as manage all correspondence with HMRC, including claiming refunds for overpaid SDLT and defending clients in HMRC investigations and litigation.

For more information or to instruct Patrick Cannon directly, contact him here .

Last Updated: 18th January 2023

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Stamp Duty Land Tax (SDLT) on leases

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Stamp Duty Land Tax (SDLT) is sometimes payable by tenants on leases. The SDLT payable is determined by the value of the lease, which is calculated based on any premium paid, the rent payable and the length of the lease. SDLT is more likely to be payable with medium to longer term leases or when the rents are higher. 

The SDLT becomes payable on the ‘effective date’ of the lease. This is usually the date of completion of the lease, though this date can sometimes vary if there has been ‘substantial performance’ before completion. The current filing deadline is 14 days from the effective date of the transaction. If SDLT is payable then an SDLT form will need to be lodged with HMRC within the relevant time frames along with any payment due.

Please note that whether or not SDLT is payable on your lease transaction, an SDLT form will still need to be filed with HMRC if the lease is for a term of seven years or longer.

Should you have any concerns regarding SDLT issues please do not hesitate to contact our commercial property solicitors on  01616 966 229 or complete our online enquiry form and we will contact you directly.

There are a number of circumstances during the term of your lease when SDLT may again become payable. It is imperative that you are aware of these circumstances as HMRC are becoming more and more aggressive in their pursuit of individuals and companies who have avoided, forgotten or simply not been aware that an SDLT payment has become due. You could be liable to fines and interest payments if you fail to correctly pay SDLT when due. The Inland Revenue have the ability to query for many years after they were due, and this gives them a large amount of leeway to chase missed SDLT payments. 

Below are a number of circumstances which may arise during, or at the end of your current lease, and which may give rise to an SDLT liability. Should you require any advice in respect of the same either now, or at any stage in the future, please do not hesitate to contact us closer for further advice. Please note that the responsibility for SDLT payments is your own and not knowing the rules will not be a valid excuse for HMRC.

Common SDLT requirements under leases

Rent review.

The SDLT payable on a lease is calculated by reference to the first five years’ rent. Therefore, if you have a rent review within the first five years and the new rent amount was not known at the outset (for example where rents are to be reviewed in line with market rents or business results as at a future date, or index-linked) then an additional return may need to be filed once the revised rent is determined. A further payment of SDLT may also be due at that stage.

Accordingly it is advisable to seek advice prior to or on the determination of any rent review, to ascertain the likely SDLT implications and whether any payments are required.

Lease expiry and holding over

If your original lease term expires, but you continue in occupation of the premises, then you are deemed to be ‘holding over’ your lease. Once your lease continues after its contractual expiry date then it is treated as if the original term of your Lease has been extended by one year. i.e. a five year lease will be treated as a six year lease. If SDLT was paid at the start of your lease (or if the extra year takes the lease over the SDLT threshold), then at this stage a further SDLT payment will be required and will need to be filed with HMRC. For each subsequent year that the lease is ‘held over’ another SDLT form needs to be filed. This is known as the growing lease regime. Failure to file further returns within the relevant short timescales could could result in fines.

Lease renewals

Unless your lease is expressly excluded from the Landlord and Tenant Act 1954, then as a commercial tenant, you are entitled to a new lease (on substantially the same terms) at the expiry of your current lease. Such renewal leases could have SDLT implications. 

You should always seek legal advice when taking a renewal lease as you have numerous rights to which you will be entitled. SDLT issues will also apply in this scenario.

Lease extension

If you agree to extend the term or the extent of the land included in your lease, then the extension is treated as a surrender and re-grant, and SDLT may be payable on the value of the re-granted lease. 

Breaking a lease

Please note that if you decide to break your lease early, you are not entitled to get any money back from HMRC, despite having paid SDLT for the full lease term. 

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• Business tax

Stamp Duty Land Tax Manual

Sdltm21590 - example 1, simple assignments of rights.

This is an example of how the rules apply to an assignment of rights.

• A enters into a sale and purchase agreement with B for some land with a consideration of £1 million payable on completion.
• B assigns its rights under the contract to C for a payment of £100,000.
• C completes the acquisition and pays A £1 million.

The intended outcome is that B should have to make a land transaction return for a transaction with consideration of £1 million but can include a claim for full relief. C should have to make a land transaction return with consideration of £1.1 million.

The transactions fall within Schedule 2A in the following way:

• The transactions fall within the definition of a pre-completion transaction in paragraphs 1(1) and (2).
• The pre-completion transaction is an ‘assignment of rights’ that falls within paragraph 2(1).
• Under paragraph 1(1), 1(2) and 2(3): the original contract is the contract between A and B, the original purchaser is B, the transferee is C and the transferor is B.
• The transferee is not regarded as entering into a land transaction by reason of the pre-completion transaction (paragraph 3).

The position of the transferee, C, is covered mainly by paragraph 4.

• C is the purchaser under a land transaction under section 44(3) (paragraph 4(4)). Paragraph 4(2) provides that this is not prevented by the words ‘between the same parties’ in section 44(10).
• Since paragraph 4(3)(a) is satisfied, paragraph 4(5) applies. Paragraph 4(5), read with paragraph 4(9), determines how paragraph 1 of Schedule 4 should be read to determine the chargeable consideration for C’s acquisition. The result is that both the £1 million given to A and the £100,000 given to B are included - total £1.1 million.
• Under paragraph 8(3) the vendor for C’s acquisition is A; the land transaction return should be completed accordingly.

The position of the transferor, B, is covered mainly by paragraph 5, with relief available under paragraph 15.

• The transactions fall within paragraph 5(1). Under that sub-paragraph, B is deemed to be the purchaser under a notional land transaction with the same effective date as C’s land transaction.
• The chargeable consideration for the notional land transaction is dealt with in paragraph 5(3): it is the total of amount A and amount B. Amount A is £1 million as that is the consideration given by C to A under the original contract (paragraph 5(5) ‘amount A’ (a)). Amount B is nil, so the chargeable consideration is £1 million.
• The transactions fall within paragraph 15 so B can claim full relief from tax (subject to the conditions outlined in paragraphs 15 and 18) under sub-paragraph (4).

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Stamp duty land tax and Land Registry requirements for assignments of leases

Registering an assignment of a lease at the land registry.

• Practical Law

Is SDLT chargeable on the assignment of a lease?

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• Landlord and Tenant
• Taxation - Land and Buildings
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• SDLT and LTT

SDLT—common lease transactions

Published by a lexisnexis tax expert.

This Practice Note provides an overview of the stamp duty land tax (SDLT) treatment of the following common lease transactions:

grant of a lease

linked leases

surrender and re-grant of a lease

agreement for lease

assignment of an agreement for lease

reverse premium

assignment of a lease

variation of a lease

surrender of a lease

lease to a bare trustee or nominee, and

reversionary lease

For information on when SDLT applies generally, see Practice Note: Land transactions, chargeable interests and chargeable transactions and for details of how to calculate SDLT payable on lease transactions, see Practice Note: SDLT chargeable consideration—leases.

This Practice Note does not cover leases and holding over. For more on this topic, see Practice Note: SDLT and holding over.

SDLT ceased to apply to any land transaction involving any interests in or over land in Scotland from 1 April 2015. From that date, land and buildings transaction tax (LBTT) applies to such transactions, subject to transitional provisions. Consequently, references in this Practice

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Related legal acts:

• Finance Act 2003 (2003 c 14)

Key definition:

Stamp duty definition, what does stamp duty mean.

A transfer tax payable on documents and instruments, rather than in respect of a transaction. It is most commonly encountered on the transfer of UK certificated shares, where the stock transfer form is the instrument that is stamped.

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Stamp Duty on Leases

By Guanqi (Lucky) Zhou, Lawyer,  Commercial Property and Leasing , Mason Sier Turnbull

Application of the lease provisions

Stamp duty on leases was re-introduced in 2009 as an anti-avoidance measure to ensure that leases are not used to acquire ownership-like rights.

The Duties Act (Vic) 2000 (“the Act”) now imposes duty on the granting, surrender, transfer or assignment of a lease for which any ‘consideration’ other than ‘rent reserved’ is paid or agreed to be paid in respect of:

• the lease (including subleases and concurrent leases);
• a right to purchase or a transfer of the land;
• an option to purchase or for the transfer of the land;
• a right of first refusal in respect of the sale or transfer of the land;
• any other lease, licence, contract, scheme or arrangement where the lessee (or an associated person) obtains any right or interest in the land other than the leasehold estate.

In determining whether the provisions apply to a lease, it is important to bear in mind that ‘consideration’ may be monetary or non-monetary.

For example, non-monetary consideration can include an obligation under a lease requiring a tenant to carry out works (structural works, construction works or fit-out by the tenant) in relation to the land whereby such works becomes the property of the landlord at the end of the lease. The consideration here is the value of the improvements carried out by the tenant.

An example of monetary ‘consideration’ is an upfront payment in relation to a long term lease based on the freehold value rather than the net present value of the leasehold. Such payment is more likely to be capital in nature and therefore falls within the category of ‘consideration’ rather than ‘rent reserved’.

There is no exhaustive list as to what might be regarded as ‘consideration’ as opposed to ‘rent reserved’ for the purpose of determining whether duty is payable on a lease. In determining whether a payment is ‘rent reserved’ or ‘consideration’, the nature and the circumstances of the transaction as a whole, including the value of the underlying land the subject of the lease, the amount paid, how the payment is calculated and the duration of the lease, must all be considered.

It is important that, prior to entering into any lease agreements, the parties seek legal advice as to whether there may be stamp duty implications in their proposed leasing arrangement to avoid nasty surprises.

Exemptions and Concessions

The standard exemptions for stamp duty as contained in Chapter 2 of the Act apply to leases. There are also specific exemptions under the lease provisions to exclude its application to caravan parks, retirement village and options for further term contained in a pre-21 November 2008 lease.

Depending on the specific circumstances, the stamp duty liability in relation to a leasing arrangement may be exempt or reduced in accordance with the available exemptions or concessions.

Liability for payment of stamp duty

The time frame for the payment of stamp duty depends on whether the dutiable transaction occurs before or after 1 April 2012. If before 1 April 2012, the stamp duty must be paid within 3 months. If after 1 April 2012, the timeframe is only 30 days.

The liability for payment of stamp duty generally falls with the tenant of a dutiable lease, or the assignee or transferee of an assignment or transfer of a dutiable lease.

In relation to a surrender of a dutiable lease, it is the landlord that incurs the liability for the payment of stamp duty. It would therefore be prudent for a landlord to first find out whether a lease is dutiable prior to giving consent for the surrender of such a lease.

If you need help with a leasing related matter, contact our  Commercial Property and Leasing team on 03 8540 0200.

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Registrar general's guidelines.

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• Documents lodged
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• Agricultural goods mortgages
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• Book debts (assignment of)
• Causes, writs and orders of court
• Change of name - deed poll
• Conveyances
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Assignment of lease

ADIS Code -  LASS

An assignment of lease, including a sub-lease, is a transfer of the lease by the lessee, ie the assignor, to a new lessee, ie the assignee. The lessor is usually not a party to the assignment.

The affected lease or sub-lease is not required. For an assignment of a lease affecting Kosciuszko National Park .

Lodgment requirements

Stamp duty -  Required. If not marked Registration insisted upon , is prohibited.

Any alteration to the term or rent must be marked.

Registration copy - Required. If unacceptable, Registration insisted upon  is prohibited.

Statement of Title Particulars form  - Not required.

NOS form  - Not required.

Index Particulars form (completion)

(A) Lodging Party - Must be completed.

(B) Instrument - Lease - Assignment of

(C) Locality -  Not required.

Link Conveyance - Not required.

Principal Deed - The registered affected lease or sub-lease.

(D) Indexing -  The assignor and the assignee, and the sub-lessor for an assignment of a sub-lease.

(E) Certification -  Required.

Document requirements 

Date: must be dated with the date of execution. If not dated advise the lodging party. If a date is not furnished, indicate Registration insisted upon  and include the reason.

Name: the full names (initials are acceptable) of the assignor and the assignee are required. Advise the lodging party of any discrepancies in names.

Operative clause: "... hereby assigns...".

Principal Deed: the number of the affected lease or sub-lease as stated in the assignment must be identical to the number stated on the IPF. If affecting a sub-lease, the head lease number is also required.

Execution: by the assignor. A power of attorney must be registered, The assignee does not have to sign.

Attestation: required. Must be witnessed by a person of 18 years of age or older who is not a party to the document.

IPF: must be completed.

Staff processing information

A Deeds search may be made for the head lease number.

CA Not required

Locality: nil.

Link Conveyance: nil.

Principal Deed: required. The registered number of the lease or sub-lease being assigned, and the registered number of the head lease for an assignment of a sub-lease.

Noting: "Affecting [description of the land]".

If the assignment affects:

• an interest, state: "interest in" (or Noting Code: "I"
• a share, state: "[fraction] share"
• part of the land, state: "[affected land description]"
• the land description relies on an attached plan, state: "see attached plan" (or Noting Code: "PL").

V: the assignor, and the sub-lessor for an assignment of a sub-lease, deceased estates or trusts, and any variations thereof.

P: the assignee, deceased estates or trusts, and any variations thereof.

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When Do I Pay Stamp Duty on a Commercial Lease in NSW?

By Lianne Tan Lawyer

Updated on October 30, 2023 Reading time: 5 minutes

This article meets our strict editorial principles. Our lawyers, experienced writers and legally trained editorial team put every effort into ensuring the information published on our website is accurate. We encourage you to seek independent legal advice. Learn more .

Creation of Lease

Transfer of lease, surrender of lease, key takeaways.

Stamp duty is a tax that’s imposed on the purchase of assets and transactions of property. If you are transferring or surrendering a lease, chances are, you will have been asked to pay stamp duty. So, when is it payable and when is it not?  In 2008, New South Wales abolished stamp duty on new leases. However, there are still certain circumstances where you, a tenant, must pay stamp duty under a commercial or retail lease . We set these out below.

This guide will help you to understand your options when you purchase a business with leased premises.

You must pay stamp duty on a new lease only where you make a lump sum payment to encourage the landlord to grant the lease.

For example, this occurs where the landlord requires a premium payment or if you enter into a lease after the landlord agrees to grant an option for an agreed amount.

The landlord usually sets this amount and you may negotiate it. However, note that as long as an amount is payable, this will be a capital payment  (i.e. the actual amount paid upfront). If it is a capital payment, it will be subject to stamp duty.

Retail Leases

For retail leases , key money payments are not permitted. The definition of key money includes premium payments.  As such, if you are a retail tenant, it is unlikely that you must pay any stamp duty on the registration of a retail lease.  

Premium Payment v Up-Front Rent

There is a difference between premium payments and rent up-front or in lump sum instalments.

The payment must be considered a capital payment. In general, if you pay a sum simply to gain access to the right to lease, rather than the use of the premises, this is likely to be considered a premium. Payments made for the use of the premises will be seen as ordinary rent, and no duty is required.

Exempt Leases

Some leases are exempt from stamp duty even if a premium is payable. These include leases:  

• of units in a retirement village ;
• of premises to the Home Care Service of NSW; or
• for approved nursing homes.

You must pay stamp duty on the assignment or transfer of a lease.   The amount will depend on whether you are paying any money specifically for the transfer.

Even if you are not paying any money for the transfer, you must still pay a nominal sum of $10 for each time you transfer your lease to the NSW Office of State Revenue . The Land and Property Information office is unlikely to accept a transfer without the nominal stamp duty, which will, in turn, delay the assignment.

As the assignment or transfer of a lease often occurs together with the sale of a business, there may also be other dutiable amounts payable.

For example, if the sale of business includes a transfer of lease and goods, then the following nominal stamp duty amounts will be payable:

• $10 on the Sale of Business Agreement;
• $10 for the duplicate Sale of Business Agreement; and
• $10 for the Transfer of Lease.

You must then pay a minimum of $30 if the transfer of the lease occurs in conjunction with the sale of the business. Importantly, the nominal rate is subject to an increase.

Finally, the surrender of a lease  is also subject to stamp duty. This is where you voluntarily give up the lease to the landlord before your lease term has expired.

The amount of duty will also depend on the specific circumstances of the surrender. If the landlord requires you to surrender the premises and pays you an amount as compensation, then this amount is subject to duty.

On the other hand, if you voluntarily surrender the lease, then similar to the lodgement of a Transfer of Lease form, you must pay a nominal $10 assessment duty.

Stamp duty is generally not payable on the registration of a lease unless key money or a premium has been paid. In addition, stamp duty will not be payable for the registration of a retail lease. You will have to pay a nominal $10 for a transfer or voluntary surrender of a lease if no other money is specifically being paid. 

If you have any questions about when to pay stamp duty on your lease, our experienced leasing lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our  membership page .

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Tá an chuid seo den suíomh idirlín ar fáil i mBéarla amháin i láthair na huaire.

Stamp Duty and leases

• Residential houses and apartments
• Agreements, assignments and surrenders
• Difference between a lease and a licence
• Paying Stamp Duty on residential leases

Varying a lease

• Transitional arrangements

You can vary the terms of an existing lease. The instrument (written document) varying the existing lease is usually called a Deed of Variation.

A Deed of Variation may vary:

• the rent payable
• the period of the lease
• the area covered by the lease
• other terms of the lease to reflect the new period or area covered.

When the Deed of Variation only varies the rent payable, Stamp Duty is not chargeable. You do not file a Stamp Duty return.

In the case of other types of variation, Stamp Duty may be chargeable. Stamp Duty is chargeable if the parties intend to:

• bring the existing lease (old lease) to an end
• create a new lease based on the terms contained in the Deed of Variation.

Stamp Duty is chargeable on the terms of the old lease as amended by the Deed of Variation. Bringing an existing lease to an end and creating a new one is usually called a surrender and re-grant.

Stamp Duty is not chargeable on a Deed of Variation if the parties to the lease do not intend to:

• bring the old lease to an end

You do not file a Stamp Duty return.

Next: Transitional arrangements

Published: 27 July 2023 Please rate how useful this page was to you Print this page

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