Stamp Taxes Online “Substantial performance” notification

Guidance notes

Substantial performance

Substantial performance means the occurrence of, any one of the following four events by the purchaser/lessee

  • Payment of at least 90% of the contract consideration or premium
  • Payment of the first rent
  • Occupation of the premises
  • Sub letting

Note: If occupation of the premises takes place:

  • under a licence: and
  • occurs on or after the date of the contract or agreement for lease

this constitutes substantial performance.

“Substantial performance” of Contracts/Agreements for:

  • A Transfer of Freehold; or
  • An Assignment of Lease

Where an agreement or contract has been substantially performed before the conveyance/assignment completion, this triggers the requirement to notify the transaction, with an ‘effective date’ of the substantial performance.

These returns can be submitted online in the normal way but must give the ‘effective date’ as the date of ‘substantial performance’.

Notification on completion

If the agreement/contract is for the transfer of:

  • a freehold; or
  • the assignment of an existing lease

the completion SDLT 1 return should be sent to Birmingham Stamp Office, it should be sent with a covering letter and a copy of the original return. The completion return will show the ‘effective date’ as the ‘completion date’ of the transaction.

'Substantial Performance' of an Agreement for:

  • Grant of lease

Where an agreement for lease is substantially performed before the grant of lease, then this triggers the requirement to notify the transaction. This is known as a ‘notional lease’. The ‘effective date’ of this ‘notional lease’ will be the date of the ‘substantial performance’.

These returns can be submitted online in the normal way but must give the ‘effective date’ as the date of ‘substantial performance’.

If the notional lease is notifiable, the following fields on the SDLT 1 return should show:

  • Field 2 = ‘L’
  • Field 4 = Effective Date (Date of substantial performance)
  • Field 10 = Blank
  • Field 11 = Blank
  • Field 12 = Blank
  • Field 16 – 25 = Complete
  • Field 17 = Start date of lease as specified in agreement for lease (if known). See note below if lease start date is not known.
  • Field 23 = NPV for this lease (NPV based on a term running from the date of substantial performance through to the lease end date) See note below on how to calculate the NPV on a notional lease
  • Field 24 = Any premium paid
  • Field 25 = Tax due on NPV


Term of notional lease unknown: The term of the notional lease may be unknown, for example, if the lease, when granted, runs for a fixed term but it is not known when the lease will be granted. In this case, the ‘notional lease’ will be for one year, under para 4 Schedule 17A F.A.2003.

If the NPV for the rental element is at the nil rate and any premium payable is also at the nil rate, the notional lease is not notifiable. An SDLT 60 Self Certificate can be completed and sent to Land Registry.

Calculating NPV on a ‘notional lease’: This will be calculated from the date of ‘substantial performance’ (not from the start date of lease, if known)

Where the Stamp Taxes Calculator asks for ‘Start Date as specified in lease’, you must enter the 'effective date' (date of substantial performance) here also, as the NPV must be calculated from the date of ‘substantial performance’ for a 'notional lease'.


Notification on completion of ‘formal lease’

  • Where a ‘formal lease’ is subsequently granted in pursuance of the agreement for lease, the ‘notional lease’ is treated as if it were surrendered at that time and the lease itself is treated as a re-grant with an ‘effective date’ of the lease completion date.
  • For the grant of ‘formal lease’, overlap relief is available for the overlap period (See para 9 of the original schedule 17A FA03), provided that the agreement for lease was subject to stamp duty land tax. If there is no additional premium and / or rent to take into account for the first 5 years (due to the overlap relief) then an SDLT 60 must be completed. Even if there is additional rent payable and /or premium, if this falls at the nil rate then an SDLT 60 must be completed.
  • Although the ‘Notional lease’ and the ‘Formal lease’ are separate transactions they are almost certainly linked for threshold purposes (but not for the purposes of paragraph 5 of Schedule 17A F.A. 2003). So for SDLT purposes, we have two leases each of which needs an SDLT1 & SDLT 4 (unless it can be self-certified). The formal lease benefits from a relief (overlap relief - para 9 Schedule 17A FA03 overlap relief) which reduces the rent, and it is the reduced figure that is used in the NPV calculation for this lease. Note that paragraph 9 relief works by reducing the rent on the new (or in this case the ‘formal’) lease, not by giving credit for SDLT previously paid.

    The only complication is if the threshold linkage gives rise to further tax on the substantially performed agreement to lease (Notional lease), in which case a further return must be made to Birmingham Stamp Office in the form of a covering letter until forms are produced for further returns.
  • If the agreement for lease is rescinded or annulled (to any extent) or for any other reason is not carried into effect, after the start of the ‘notional lease’ commencement date, but before the grant of formal lease, the tax paid may be repaid. The repayment must be claimed by an amendment of the land transaction return made in respect of the agreement. (Section 44 (9) FA 03)

If the formal lease is notifiable, the following fields on the SDLT 1 return should show:

  • Field 2 = ‘L’
  • Field 4 = Effective Date (Date of lease completion)
  • Field 10 = Blank
  • Field 11 = Blank
  • Field 12 = Blank
  • Field 16 – 25 = Complete
  • Field 22 = Total premium payable (additional premium paid for this lease only)
  • Field 23 = NPV for this lease only (NPV based on any additional rents payable for the first five years of the term - running from completion date to end date of lease)
  • Field 24 = Total tax due on any premium paid for this lease
  • Field 25 = Total tax due on NPV for this lease


See the provisions for contracts on or after 10 July 2003 FA03/SCH19/PARA4(3). The substantial performance of such a contract before implementation date (1 December 2003) is disregarded. A charge to stamp duty land tax can arise, if at all, only on completion - by virtue of FA03/SCH19/PARA 4(3).