LBTT6007 - Loans and deposits and grant or assignation

LBTT guidance on loans and deposits in connection with the grant or assignation of a lease.

Where a tenant (or any person connected with or acting on behalf of the tenant) makes a loan or pays a deposit (whether to the landlord or to a third party), the repayment of which is contingent on anything to be done or not to be done by the tenant or on the death of the tenant, then the amount of the loan or the deposit is to be treated as consideration, other than rent paid by the tenant for the grant of the lease.

Where an assignee (or any person connected with or acting on behalf of the assignee) makes a loan or pays a deposit (whether to the landlord or to a third party), the repayment of which is contingent on anything to be done or not to be done by the assignee or on the death of the assignee, then the amount of the loan or the deposit is to be treated as consideration, other than rent paid by the assignee for the assignation of the lease.

These rules do not apply however where the deposit does not exceed twice the relevant maximum rent. The relevant maximum rent in relation to the grant of a lease is the highest amount of rent payable in respect of any consecutive 12 month period during the term of the lease. In relation to the assignation of a lease, the relevant maximum rent is the highest amount of rent payable in respect of any consecutive 12 month period during the term of the lease remaining outstanding at the date of the assignation.

In determining the highest amount of rent, where applicable any contingent, uncertain or unascertained rent should be included. However, any rent previously taxed in an overlap period (see LBTT6023) should be disregarded.

Tax is not chargeable if it would only be chargeable because the nil rate tax band was excluded (where the relevant rent attributable to non-residential property is less than £1,000 per year).

LBTT(S)A 2013 schedule 19 paragraph 17

Ref ID: 
LBTT6007
Archive Date: 
9 March 2015
Last updated: 
9 March 2015
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