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Taxation of lease premium and lease rentals

SDLT is charged on the grant of a new lease and other transactions treated as such (including lease variations to increase rent).

It is chargeable on any lease premium and also on the net present value (NPV) of any rent payable over the terms of the lease (provided this is more than a nominal amount of rent). For SDLT purposes, ‘premium’ is defined as chargeable consideration other than rent (see FA 2003, Sch 5, para 9) and tax is charged on the premium based on the rates set out in FA 2003, s 55 (which are the same rates applicable to purchases of freehold interests) as modified, if relevant, by the residential higher rates for purchases of additional dwellings by individuals or dwellings purchased by companies (see FA 2003, Sch 4ZA) and the increased rates for non-resident transactions (see FA 2003, Sch 9A).

For further information on the specific residential and non-residential rates that apply to the lease premium and the NPV of rental payments,