Can the 3% surcharge apply to lease extensions?

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“I have some clients thinking of purchasing an investment property with a short lease (paying the higher rate of SDLT at that time) and extending the lease at a later date. They have posed the question with me as to whether the higher rate of SDLT would apply again in respect of the premium paid for the lease extension (the premium will be substantial and over the threshold).”

Source: BLG Member 


Yes it would, assuming that at the effective date of the transaction the clients owned more than one dwelling.

A lease extension takes effect as a surrender and regrant.  The old stamp duty relief on the surrender and re-grant of leases was carried over for SDLT purposes in paragraph 16 Schedule 17A FA 2003. The surrender of an existing lease is not treated as chargeable consideration for the grant of the new lease between the same parties. Accordingly, the charge to SDLT is calculated on the consideration (premium and/or rent) under the new lease, ignoring the value of the lease that is surrendered.

At the time of publication this response was correct however as tax legislation and practice change from time-to-time you should take specific advice before taking any action.

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