SDLT on leasehold property?

HighLevel

Hello,

Just doing some research on a flat I'm potentially looking to purchase. As i understand it the property is leasehold with a 999 year lease with a "Pepercorn rent" starting some time in the 1990s.

Looking that the government SDLT website, i'm finding the information as clear as mud.

But i think this is the bit that is relevant to me:

"The new owner pays a lump sum for the assignment of the lease and pays SDLT on this amount.

In most cases, use the same rates and thresholds to work out the amount of SDLT as you would if you bought a freehold property (residential or non-residential freehold)"

The Flat is £120,000 (so going off the above this is under the £125,000 "Zero Band") So does that mean that I'd pay no taxes at all on the lease?

If I use the calculator on the site it gives:

Net present value: £1335
SDLT on Rent: £0
SDLT on premium: 0

So does this mean that I would pay £1335 or £0??

Or is the £1335 the "Assignment of lease Lump Sum" referred to in the text description?


Help!

Surrey_EA

Unless I've completely missed something all these years, stamp duty is not affected by the leasehold/freehold status of a property. SDLT is paid on the purchase price, so in your case you fall into the part which is exempt, and therefore you will be £0.

benjus

The lump sum it refers to is the amount you are paying for the flat, i.e. £120k (because you are not really buying the flat, you are buying the lease).

The Net Present Value is based on the ground rent payments for the next few years as SDLT can be payable on the rent as well if it's high enough. I thought "Peppercorn" meant "Zero", so I'm not sure why you have a number here.

Anyway, you don't have to pay any SDLT.

AnotherJoe

benjus wrote: »

The lump sum it refers to is the amount you are paying for the flat, i.e. £120k (because you are not really buying the flat, you are buying the lease).

The Net Present Value is based on the ground rent payments for the next few years as SDLT can be payable on the rent as well if it's high enough. I thought "Peppercorn" meant "Zero", so I'm not sure why you have a number here.

Anyway, you don't have to pay any SDLT.

Nope, 'peppercorn' means a non zero but trivial amount. Might be 75p a year or something like that.

Hoploz

'Peppercorn' is supposed to mean just that. Pay the freeholder one peppercorn.

But that doesn't normally happen today so you agree to a small amount of actual money!

HighLevel

Thanks all, for the replies much appreciated.

In the calculator I put "£100" for each of the next 5 years rent for the calculator so assume this is how it had a net value.

booksurr

Surrey_EA wrote: »

Unless I've completely missed something all these years, stamp duty is not affected by the leasehold/freehold status of a property. SDLT is paid on the purchase price, so in your case you fall into the part which is exempt, and therefore you will be £0.

Clearly you have indeed missed "something" as SDLT does, in certain circumstances, take account of both the premium ("lump sum" put crudely) and the ground rent paid
https://www.gov.uk/guidance/stamp-duty-land-tax-leasehold-purchases

"New leases
If you buy a new lease, the SDLT you pay depends on the amount of:
- the premium
- any rent due"

....

"The net present value of the rent
If the net present value of the rent is more than £125,000 (the SDLT threshold on residential property), the buyer pays SDLT on the rent and on the premium."

booksurr

HighLevel wrote: »

If I use the calculator on the site it gives:

Net present value: £1335
SDLT on Rent: £0
SDLT on premium: 0

So does this mean that I would pay £1335 or £0??

it means that you have 0 SDLT to pay as both the premium and the rental net present value are below the threshold