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Published 14 August 2014
Where a lease subject to a tenancy or tenancies is surrendered, HMRC now accept it is possible to treat the surrender as a transfer of a business as a going concern (TOGC), saving the landlord SDLT.
HMRC had until recently taken the view that an interest in land needs to be transferred for there to be a TOGC. Where a lease subject to tenancies was surrendered to the landlord HMRC did not consider this to qualify, as an interest in land had been extinguished instead of transferred.
It is possible the person surrendering their lease has exercised an option to tax (so they may recover their own input VAT in relation to their onward letting of the property). This forces the landlord to pay VAT in addition to any surrender premium. While VAT is usually just a cashflow issue to a landlord (assuming they have also opted to tax the property) SDLT is calculated on both the surrender premium and the VAT element and is therefore a true cost.
If a surrender classifies as a TOGC, however, there is no VAT chargeable on the surrender sum (whether or not any option to tax has been made) and therefore no corresponding SDLT on that VAT. If you think you have overpaid SDLT in the last twelve months because of this, or have a case where this may apply coming up, please get in touch to see if a saving or repayment is available.
Andrew Morgan, Christopher Stanwell
Christopher Stanwell, Andrew Morgan