A building in Liverpool consists of five leased flats. The freehold is owned by a company owned by all five lessees. One of the lessees is now extending their 75-year lease to a 999-year lease, with nil ground rent. The deemed value of the lease extension is £69,000. However, no premium is being paid on the lease extension. What are the stamp duty land tax (SDLT) consequences of this lease extension? Does it make a difference that this lessee is 'connected' to the company owning the freehold? 

Arthur replies: 

SDLT is calculated on chargeable consideration, which, for a lease, is any premium payable, plus the net present value (NPV) of the rent for the new term. In this scenario, no premium is being paid, and the ground rent is nil. So, there is no chargeable consideration, and so no SDLT needs to be paid. See HMRC’s Stamp Duty Land Tax Manual at SDLTM11010. 

Regarding an SDLT return, see SDLTM12010 and SDLTM00310, which show that since the chargeable consideration is less than £40,000, and the relevant rent is less than £1,000, no notification is required.  

Even if this individual was considered connected to the company, it would not be an issue. See https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm30220 where it says, "Section 53 Finance Act 2003 applies to all transfers between a vendor (individual or company) and a company connected to them, when the company is the purchaser." But in this scenario, the company is not the purchaser. It is the other way round. The company is transferring the chargeable interest by extending the lease.