Home › Forums › Patrick Cannon › How is SDLT charged on interim rents?
- This topic has 2 replies, 1 voice, and was last updated 28th October 2005 at 10:33 am by Andrew Campbell.
Example A in TN1, which deals with interim rents under L&TA 1954 Part II (business tenancies), seems to offer landlords and tenants a curious choice. It appears that HMRC will accept that, where the interim rent (i.e. the difference between what the tenant actually paid during the hold-over period and what it eventually agrees to pay for it) is agreed and quantified on completion of the grant of the renewal tenancy, it may be treated as premium for the grant of the new lease and not as the rent payable under a deemed Para.13 Sch. 17A new lease arising as a result of the variation of the old “growing” lease.
Is there not a trap here? Most business leases carry an annual rent of more the ?600 p.a. So the zero-rate band is disapplied. Given that the deemed Para. 13 lease is not linked with the original lease (see Example A -3rd bullet point), the logical choice seems always to be to go down the Para. 13 deemed lease route, where a full ?150,000 zero-rate band appears, effectively, to be availablePatrick CannonGuest
Well spotted. I find the way that HMRC apply the concept of interim rent slightly odd in this context because isn’t the interim rent actually whatever rent the court detrmines on an application under section 24A ie the interim rent incoporates the contractual rent payable on the continuation of the old lease. This seems clear when rents are falling and it is the tenant who seeks a reduced interim rent. I am not aware that clients usually state whether the interim rent is for continued occupation or the new tenancy. Presumably they should now do so to get the more favourable SDLT treatment.Andrew CampbellGuest
I suspect the vast majority of interim rents are agreed beween L & T without any Court Order being obtained. Usually T agrees to pay interim rent at the rate agreed for the new lease; and the “backfall” (i.e. the difference between the rent paid and the new rent) is paid when the new lease is granted.
An interim rent reduction would seem to be within new Para. 15A (1) and treated as an acquisition of a chargeable interest by T, but one assumes the circumstances where any consideration is given for it will, in practice, be extremely rare. It would be good if the revised SDLT manual confirmed that HMRC does not regard the grant (if any) of the renewal lease as consideration for an interim rent reduction. Happily, it seems as if such acquisitions will also rarely be notifiable under S77.