Stamp duty land tax and Land Registry requirements for Business Leases

Legal Requirements following Completion of a Lease


Legal requirements following completion of a lease

Once a lease has been granted the tenant may need to pay tax: 1) Stamp Duty Land Tax (SDLT) if the property is in England; or 2) Land Transaction Tax (LTT) if the property is in Wales and register the lease at the Land Registry.

Whether these steps need to be taken depends on the length of term of the lease and the amount of rent payable. These points are considered below.

Although the duty to pay SDLT or LTT and register the lease falls on the tenant, the landlord should check that the tenant has complied with any Land Registry requirements as a failure to register a lease could cause problems for all parties in the future.

Stamp duty land tax (SDLT)

SDLT is a tax on land transactions in England, including the grant (and assignment) of leases. It is a self-assessment tax. The tenant must submit a Land Transaction Return and payment (if any tax is due) to HM Revenue & Customs (HMRC) within 30 days of the “effective date” of the transaction. The time limit is being reduced from 30 days to 14 days for those transactions with an ‘effective date’ on or after 01 March 2019.

Usually, but not always, the effective date is the date of completion of the lease.

The HMRC website has guidance on SDLT liability for leasehold transactions and a useful SDLT calculator. See https://www.gov.uk/guidance/stamp-duty-land-tax-leasehold-purchases .

Land Transaction Tax (LTT) in Wales

LTT is a tax on land transactions in Wales, including the grant (and assignment) of leases. It is a self-assessment tax. The tenant must submit a Land Transaction Tax Return and payment (if any tax is due) to the Welsh Revenue Authority (WRA) within 30 days of the “effective date” of the transaction. Usually, but not always the effective date is the date of completion of the lease.

For further guidance please see the WRA website . Please also see the LTT calculator .

Both the SDLT and LTT rules are complex, with many exceptions, exemptions and reliefs. Whilst LTT is broadly the same as SDLT, there are some key differences.

If your transaction is not straightforward you should take specialist tax advice to ensure that you pay the correct amount of SDLT or LTT (whichever applies).

Registration of leases at the Land Registry

As a general rule, a lease granted for a term of more than 7 years must be registered at the Land Registry. If it is not registered, it will not take effect as a “legal” interest but only as an “equitable” interest. This is less secure for the tenant and will make future dealings with the lease more complicated for all concerned.

An application to register a lease is made on Land Registry form AP1, assuming that the landlord’s property is itself registered land. The lease, a certified copy, and a fee must be submitted, together with evidence that any SDLT or LTT requirements have been met. Further information can be found in Land Registry Practice Guide 25: https://www.gov.uk/government/publications/leases-when-to-register .

Noting of leases on the landlord’s registered title

If a lease is not registrable, for example because its term is only 5 years, but the lease grants easements, for example a right of way over adjoining land, the tenant must apply to the Land Registry to register the easements in the lease.

This application is also made on Land Registry form AP1, and the lease, a certified copy, and a fee must be submitted, together with evidence that any SDLT or LTT requirements have been met. Further information can be found in Land Registry Practice Guide 62: https://www.gov.uk/government/publications/easements .

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