Jun, 2017


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  1. #1

    Default Freeholder buying a long leasehold interest by lease termination

    Hi all, first post, please bear with me. This is the situation:

    1. A Limited owns the freehold interest in a building containing several flats, all of which have been sold off on 100 yr leases

    2. Mr B (unconnected to A Limited) owns a leasehold interest in one of the flats and wishes to sell his flat

    3. A Limited proposes to acquire the flat from Mr B by simply paying a fee to Mr B to early-terminate the lease

    4. The property is <£500k value so would not be chargeable for ATED

    I do not believe the leases of the other flats contain any provisions prohibiting this (other than that A Limited would need to contribute to the annual service charges)

    The question is: would A Limited have magically avoided stamp duty on the "purchase", or is there some general anti-avoidance terms that would catch the transaction?

    I've googled around but only find a tonne of articles on leaseholders buying freeholds and this is the other way around.

    Look forward to your thoughts and thanks for reading!

  2. #2
    Join Date
    Aug 2010


    Interesting. Am I missing something here?

    SDLT is incurred when there is

    a transfer of land or property
    in exchange for payment (or via a mortgage)

    For example of you buy a share in a house via a change in a deed of trust

    It seems that there is a transfer of land here (in the same sense that there would be when the lease is sold in the first place - here it is sold back).
    And there is an exchange of money.

    Return via a natural ending of a lease would have the same effect in theory perhaps, but here it doesn't matter as the market value would decline as the lease becomes shorter, and as the remaining time reached one second the value market value of the lease would become zero (so no SDLT).

  3. #3


    Thanks for the reply.

    I think you are right that there is a transfer of land in return for cash consideration, so there would be a stamp tax liability

    Your last point raises another possibility - I wonder if A Limited and Mr B could enter a deed of variation to reduce the lease length to a very short lease. A Limited could then acquire the short lease from Mr B, and short lease transactions do not require stamp duty tax returns

    Mods - sorry, this started as a long leasehold question but turned into a tax question..

  4. #4
    Join Date
    Aug 2008


    The Tax Office have a unit checking the sale price declared in property sales and will chase you for sdlt due any "valuations below market value" and chase Mr B for any cgt on under pricing of the property. You also run the risk of being prosecuted under the Fraud Act.

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