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Lease is more
This year's Budget brought in a new tax, Stamp Duty Land Tax (SDLT), to come into force on 1 December. In fact, it just replaces the previous Stamp Duty charge on land transactions, and in most circumstances (e.g. on the purchase of a house) you will pay exactly the same SDLT as you would have paid
SD. SDLT is supposed to be harder for clever lawyers to get around.
 One of the most significant changes is on the grant of a new lease. Where a landlord grants a lease for an up-front premium and rent over a period, there has always been a charge to SD on both the premium and the rent. The calculation of the charge on the rent is very different under
SDLT, and the amount is likely to be much higher.
Of course, the clever lawyers are trying hard to spot ways around this. If you act quickly, you could finalise your lease before 1 December. Or you could make do with a "licence to occupy" rather than a lease, because a licence isn't subject to
SDLT. But these may not suit your circumstances.
The main thing will be to be aware of the SDLT charge, and to build it into your calculations. Otherwise, it can be a nasty sting in the tail of a property deal. We will be happy to advise you on the amounts that are likely to be involved.
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The SDLT charge on rent will be 1% of the net present value of all the rent under the lease, discounted at 3.5%. That compares with the old charge of 1% (leases up to 7 years), 2% (7 - 35 years), 12% (35 - 100 years) or 24% (over 100 years) of one year's rent. For comparison, the percentage applicable to a 7 year lease will be about 6% of the annual rent, and 20% for a 35 year lease.
The calculations will be complex if the lease specifies changes to the rent during the term, but it is normal to include a provision for "rent reviews to market value, but upwards only" to take place at set intervals. If the future changes to the rent cannot be ascertained, then the first year's rent is used for all years. The obvious scope for abusing this - by setting a low initial rent with an immediate rent review to market value - is prevented by anti-avoidance rules.
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