SDLTM27080 - Reliefs: Right to buy transactions, shared ownership leases etc

Notes to assist the completion of the SDLT1 land transaction return

These notes provide guidance on how to complete the first two pages of the SDLT1 land transaction return when:

  • a shared ownership lease is granted
  • a tenant acquires a greater share of the property by staircasing

Examples A to C concern the grant of a shared ownership lease where the purchaser decides to pay stamp duty land tax by reference to the market value method.

Example D concerns the grant of a shared ownership lease where the purchaser decides to pay on the premium and rent method.

Examples E to I deal with intermediate staircasing and final staircasing transactions.

Grant of a shared ownership lease

Purchasers can either pay stamp duty land tax on each separate stage of a phased purchase by reference to the prevailing rates of tax in force at the time, or alternatively, can make a market value election by paying tax as if the property had been purchased outright from the beginning.

The decision whether to pay on the market value basis is a matter for the purchaser and their legal advisers.

Stamp Taxes staff can assist in calculating the tax due on either basis but that is the extent to which they are able to help. Purchasers must therefore make their own informed decisions.

Example A - Freehold reversion available and the Purchaser elects to pay on full market value

  • Code L is entered in box 2
  • Do not place a code in box 9 unless disadvantaged areas relief or some other relief is being claimed
  • Leave box 10 blank
  • Box 14 = the stamp duty land tax due on full market value as shown in box 24
  • Boxes 16 to 22 and box 24 are to be completed
  • Box 20 = the starting (specified) rent in respect of the percentage being leased (i.e. the part not purchased)
  • Box 22 = the full market value.
  • Box 24 = stamp duty land tax due on full market value

Example B - Freehold is not available but 100% leasehold interest can be purchased by staircasing. Purchaser elects to pay on full market value.

  • Code L is entered in box 2
  • Do not place a code in box 9 unless disadvantaged areas relief or some other relief is being claimed
  • Leave box 10 blank
  • Box 14 = total of boxes 24 and 25
  • Boxes 16 to 25 are to be completed
  • Box 20 = minimum rent payable. This is often a peppercorn in which case “0” is entered
  • Box 22 = full market value.
  • Box 23 = the Net Present Value (NPV) of the minimum rent
  • Box 24 = stamp duty land tax due on full market value
  • Box 25 = stamp duty land tax due on NPV of minimum rent

Example C - Grant of a shared ownership lease where only a limited percentage of the leasehold is purchasable. Purchaser elects to pay on market value

Not all leases allow the tenant to staircase up to 100%.

Such leases will specify an upper staircasing limit which is usually a 75-80% share of the leasehold interest.

In such cases, the answer will be to use Example B but with the following two amendments

  • Box 22 = Market value of the maximum share of the leasehold interest available to be purchased.
  • Box 24 = stamp duty land tax due on market value of the maximum share of the leasehold interest available to be purchased

Example D - Freehold reversion available or leasehold property. Purchaser does not elect to pay on full market value

  • Code L is entered in box 2
  • Do not place a code in box 9 unless disadvantaged areas relief or some other relief is being claimed
  • Leave box 10 blank
  • Box 14 = total of boxes 24 and 25
  • Boxes 16 to 25 are to be completed
  • Box 20 = the starting (specified) rent in respect of the percentage being leased, i.e. the part not purchased
  • Box 22 = the actual premium paid for the amount being purchased
  • Box 23 = the Net Present Value (NPV) for the term of the lease, based upon the specified rent. Use the normal method of calculating the NPV on the rent of a lease
  • Box 24 = stamp duty land tax due on premium
  • Box 25 = stamp duty land tax due on NPV

Staircasing Transactions

If, when a shared ownership lease is granted, the lessee pays stamp duty land tax by reference to the market value method, then no further stamp duty land tax will be payable should the lessee decide to acquire further shares in the property.

However, if the lessee staircases to 100%, acquiring the freehold reversion or the full leasehold interest, then this final transaction will be notifiable, even though no further tax is payable. Examples E to G are given below.

Intermediate transactions, to the extent that there are any, e.g. staircase from 50% ownership to 75% ownership, are neither notifiable nor chargeable.

If the lessee decides not to pay by reference to the market value method then intermediate transactions are neither notifiable nor chargeable providing the lessee does not staircase above 80%.

However, if the lessee staircases above 80%, or staircases to 100% so acquiring the freehold reversion or full leasehold interest, then such transactions are both notifiable and chargeable. Examples H-I are given below.

Example E - Where the purchaser has paid stamp duty land tax on the full market value at the outset, if the final capital payment completes the purchase of the freehold reversion

“F" is entered in Box 2.

The final capital payment is entered in Box 10.

"0" is entered in Boxes 14 and 15.

Code 28 is claimed in Box 9.

Example F:

The purchaser has paid stamp duty land tax on the full market value at the outset. The final capital payment completes the purchase of the full leasehold interest.

  • Code L is entered in box 2
  • Code 28 is claimed in box 9
  • "0" is entered in boxes 14 and 15
  • Boxes 16 to 25 are completed
  • The final capital payment is entered in box 22
  • “0” is entered in box 23
  • "0" is entered in box 24
  • "0" is entered in box 25

Example G - The purchaser has paid stamp duty land tax at the outset on the market value of the maximum share of the leasehold interest available to purchase say, for example, 80%. The final capital payment completes the purchase of this maximum leasehold interest

This transaction is neither chargeable nor notifiable.

Example H - The purchaser has paid stamp duty land tax at the outset on the premium plus the net present value of the specified rent. The final capital payment completes the purchase of the freehold reversion

  • Code F is entered in box 2
  • Nothing is entered in box 9
  • The final capital payment is entered in box 10
  • In box 13, an ‘X’ must be entered in the ‘Yes’ box to show that the final transaction is linked to the previous acquisitions.

The aggregated capital sums paid for all shares of the property, that is the initial premium, any amounts paid for intermediate staircasing and the final payment, also need to be entered in this box

  • The tax calculated for box 14 will be based on the final capital payment, but the rate of tax will be determined by aggregating the capital sums paid for all the shares of the property
  • Do not complete boxes 16 to 25

Example I - The purchaser has paid stamp duty land tax at the outset on the premium plus the net present value of the specified rent. The final capital payment completes the purchase of the full leasehold interest. The landlord grants a new lease so that it is no longer a shared ownership transaction

  • Code L is entered in box 2
  • Boxes 16 to 25 are completed
  • The final capital payment is entered in box 22
  • The net present value of the rent relating to the new lease created is entered in box 23.
  • The tax calculated for box 24 will be based on the final capital payment in box 22, but the rate of tax will be determined by aggregating the capital sums paid for all the shares of the property
  • The stamp duty land tax relating to the net present value of the rent element of the new lease created is entered in box 25
  • Boxes 24 and 25 are added together to arrive at the figure to enter in box 14
  • Nothing is entered in box 9.
  • The purchaser must complete the linked transaction box 13 by marking the Yes box and entering the aggregated total capital sums paid for all the shares of the property, including the initial premium, any middle tranches and the final payment

If you have any further questions regarding the completion of the SDLT1, please contact the Stamp Taxes Helpline on 0845 603 0135.

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