When you extend a lease, the SDLT calculation has two parts. The first is the premium you pay to the freeholder for the extension itself. The second is the net present value of any ground rent payable under the new or varied lease. Both elements form part of the chargeable consideration, and each is assessed under different rate bands. This is materially different from a straightforward purchase, where the SDLT is simply a percentage of the purchase price.
The NPV element is where most errors arise. Conveyancing software is typically designed for standard purchases and does not always handle the NPV calculation correctly for lease extensions. In some cases we see the NPV component overlooked entirely, with SDLT calculated on the premium alone using standard residential rates. In others, nil returns have been filed where SDLT was actually due because the NPV component was not identified.
The most frequent issue is the two-part calculation being reduced to a single calculation on the premium only. We also see cases where the distinction between a new lease and a variation of the existing one has not been considered, which affects the calculation basis. Where a lease extension qualifies as a new lease rather than a variation, the SDLT treatment can differ — and the difference is not always obvious from the legal documents alone.
There is also the question of whether the extension is notifiable. Not all lease extensions require an SDLT return, but where the consideration exceeds the nil-rate threshold or where the transaction is otherwise notifiable, a return must be filed within 14 days of completion regardless of whether any tax is actually due. Filing late attracts automatic penalties even where the liability is nil.
We calculate the correct SDLT liability on the lease extension, covering both the premium element and the NPV element. We confirm whether the transaction is notifiable and whether a return needs to be filed. We identify any applicable reliefs and prepare the SDLT computation in a format your solicitor can use when filing the return. Where a review before completion identifies that the solicitor’s initial calculation was incorrect, we provide a revised computation with supporting analysis.
Send us the lease extension heads of terms or agreed premium, the existing lease, and any draft SDLT computation your solicitor has provided.
We review the transaction and calculate the correct SDLT liability, including both the premium element and the net present value of future ground rent.
We provide a written SDLT computation confirming the correct treatment. If our figure differs from the solicitor's calculation, we set out the basis for the difference with full supporting analysis.
We provide the computation in a format your solicitor can use directly when filing the SDLT return. We liaise with your solicitor if any points need clarification before completion.
Schedule a free 30-minute consultation to discuss your personal tax compliance.
