Stamp duty relief when you sell a property and lease it back
Sale and leaseback relief at a glance
A lease granted back to the seller may be exempt from SDLT if the strict conditions in section 57A are met. The sale itself can still be taxable under the exchange rules.
- Check both parts of the deal separately.
- Check the link between the sale and leaseback.
- Do not overlook market value or company group status.
Scroll down for the full analysis.
Read the original guidance here:
Stamp duty relief when you sell a property and lease it back
Stamp duty relief when you sell a property and lease it back
Selling a property and immediately leasing it back may give you stamp duty land tax relief on the new lease. That does not make the entire deal free from SDLT. A tax charge may still arise on the sale, often calculated by reference to market value.
What this rule is about
A sale and leaseback has two parts. You transfer a freehold or leasehold interest to another person. That person then grants you a lease of all or part of the interest.
This arrangement commonly arises where an owner needs finance but wishes to continue using the property. Properties involved may be a shop, office, factory, home or other land.
An important point is easily missed: SDLT treats the arrangement as two land transactions. One is the sale. Another is the leaseback.
Usually, the two steps may amount to an exchange. This matters because SDLT does not merely consider the cash that changes hands.
What the official source says
HMRC’s manual explains that section 57A may exempt the leaseback element where the arrangement qualifies, the other party grants the lease back to the original owner, and the parties meet the statutory conditions. Relief applies only to that lease. It does not automatically exempt the sale.
For the relief to apply, the arrangement must meet each relevant part of the statutory test:
- You transfer or grant a major interest in land to the other party.
- That party grants a lease back to you out of the interest they received.
- The sale is made wholly or partly in return for the leaseback.
- Any other thing given for the sale is only cash, debt taken on, debt paid off, or debt released.
- The deal does not involve a transfer of rights under a property contract or a pre-completion transaction.
- If both parties are companies, they must not be members of the same group when the leaseback takes effect.
What counts as a major interest? Here, it is a freehold or leasehold interest. The leaseback may cover only part of the property that was transferred.
HMRC also states that a single sale may support several leasebacks. Several sales may likewise support one leaseback. The provision is not confined to a straightforward one-for-one arrangement.
What this means in practice
Relief may remove SDLT from the leaseback. The sale, however, still requires its own SDLT calculation. Exempting the lease does not exempt the whole arrangement.
Where the two steps amount to an exchange, the law will generally compare the market value of each interest with the consideration given for that step, rather than looking only at cash. What matters can be the higher amount. This is why a lease at a low rent, or with no premium, does not alone determine the SDLT outcome.
- Work out the SDLT position for the sale and the lease separately.
- Do not assume that a low cash price means low SDLT.
- Check whether the leaseback burdens the interest sold when its market value is assessed.
- Keep the sale and lease documents together with any side agreement.
- Check the company ownership position on the effective date, not just before negotiations began.
HMRC’s manual says that the value of the interest sold may take account of the leaseback where there was a written agreement for it when the sale occurred. Without such an agreement, HMRC says the sale may instead be valued as an interest free from the leaseback burden.
Although the difference may sound slight, it can alter the figure used for SDLT.
How to analyse it
Begin with the transaction’s substance rather than its label. A deal described as refinancing, equity release or home reversion may nevertheless be a sale and leaseback for SDLT purposes. Its substance matters.
- List every transfer, lease and agreement in date order.
- Identify exactly what interest you sold or granted.
- Check that the leaseback comes out of that same interest.
- Ask whether the sale was agreed in return for the leaseback.
- List everything else given for the sale, including money and debt arrangements.
- Check whether anyone transferred rights under a contract before completion.
- If companies are involved, test whether they were in the same group on the effective date.
- Value the sale interest and the leaseback interest under the exchange rules.
- Consider whether the connected-company market-value rule applies to the sale.
If your solicitor says that the leaseback is exempt, ask separately what SDLT treatment has been applied to the sale. That part is often overlooked.
Example
Priya’s company holds a lease of a commercial building. To raise funds, it assigns the lease to an unconnected company for £1 million. The buyer grants Priya’s company a new lease of the ground floor at a market rent.
On HMRC’s stated view, the leaseback may qualify for the section 57A exemption if the other conditions are met. The assignment of the original lease remains relevant. Its SDLT amount is calculated under the exchange rules using the higher of £1 million and the market value of the original lease as affected by the new ground-floor lease.
Changing one fact may change the result. If both companies are 75% subsidiaries of the same parent at the relevant time, the section 57A leaseback exemption is unavailable.
Why this can be difficult in practice
These arrangements often involve several documents: a funding agreement, transfer, lease, rent agreement and debt documents. The tax outcome depends on how those documents work together and on what the parties actually agreed.
You may think that the exemption depends simply on receiving a lease back. It does not. The link between the sale and leaseback matters, as do the other forms of value passing between the parties.
- A leaseback of only part of the property needs careful plans and wording.
- Debt release or debt assumption must be identified clearly.
- A promise made outside the main transfer document may still be important evidence.
- Group status has a detailed statutory meaning and is not decided by a shared director or trading name.
- A low value for the sale interest needs evidence if the leaseback reduces its value.
- Group relief is a separate relief with its own conditions and possible withdrawal rules.
HMRC’s manual provides useful evidence of HMRC’s approach. It is not the law itself. Whether relief is available is determined by the legislation and the transaction’s facts.
Key takeaways
- A qualifying leaseback may be exempt from SDLT.
- The sale remains a separate SDLT transaction.
- Market value and the deal documents can decide the result.
Technical analysis
For advisers, and for anyone who wants to check the law behind this page. You do not need this section to understand the guidance above.
Legislation
- FA 2003 section 47 — when linked land swaps are treated as exchanges
- FA 2003 Schedule 4 para 5 — how the amount paid is worked out on exchanges
- FA 2003 section 53 — market value rule for connected company transactions
- FA 2003 section 57A — exemption for qualifying sale and leaseback arrangements
- FA 2003 section 45A — effect of transferring rights under a property contract
- FA 2003 Schedule 7 para 1 — when companies count as members of the same group
Official guidance
The pages below are HMRC’s guidance. Guidance is not law. It sets out how HMRC reads the legislation, and it is not binding on you, on a tribunal or on a court. Where guidance and the legislation differ, the legislation wins. HMRC can also change or withdraw guidance, and it may not cover your facts.
Where this is not settled
- Whether the sale was given wholly or partly in return for the leaseback depends on the documents and the real arrangement.
- The market value of a property subject to a leaseback can require specialist valuation evidence.
- The source is HMRC guidance, not law. Its view on valuation must be tested against the legislation and the transaction documents.
Evidence you would need
This kind of case is decided on the facts of the individual property. These are the records that usually settle it, and the ones an adviser would ask you for.
- The transfer, lease and any agreement linking them
- Details of all cash payments and debts assumed, released or repaid
- A plan showing the land sold and the land leased back
- Company ownership details at the effective date
- Evidence of market value, including the effect of the leaseback
- Details of any transfer of rights or pre-completion arrangement
Explore this with an AI
Readers often want to test their own situation. Copy the prompt below into ChatGPT, Claude or Gemini. It hands the model the actual legislation for this page rather than letting it answer from memory, and tells it to be explicit about what is uncertain. What comes back is information, not advice – check it against the links above.
I am researching UK Stamp Duty Land Tax (SDLT), which applies in England and Northern Ireland. MY QUESTION Stamp duty relief when you sell a property and lease it back [Replace this with your own situation: what you are buying, the price, the dates, who the buyer is, and what you plan to do with the property.] THE LAW THIS TURNS ON - FA 2003 section 47 - when linked land swaps are treated as exchanges https://www.legislation.gov.uk/ukpga/2003/14/section/47/2025-11-17 - FA 2003 Schedule 4 para 5 - how the amount paid is worked out on exchanges https://www.legislation.gov.uk/ukpga/2003/14/schedule/4/paragraph/5/2025-11-17 - FA 2003 section 53 - market value rule for connected company transactions https://www.legislation.gov.uk/ukpga/2003/14/section/53/2025-11-17 - FA 2003 section 57A - exemption for qualifying sale and leaseback arrangements https://www.legislation.gov.uk/ukpga/2003/14/section/57A/2025-11-17 - FA 2003 section 45A - effect of transferring rights under a property contract https://www.legislation.gov.uk/ukpga/2003/14/section/45A/2025-11-17 - FA 2003 Schedule 7 para 1 - when companies count as members of the same group https://www.legislation.gov.uk/ukpga/2003/14/schedule/7/paragraph/1/2025-11-17 Guidance page from HMRC on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm16040 HOW I WANT YOU TO ANSWER 1. Work from the legislation above. Read it before answering. Guidance from HMRC is its view of the law, not the law, and does not bind a tribunal or a court. 2. Tell me what the rule actually requires, in plain English. 3. Tell me which facts decide the answer, and which facts would change it. 4. Tell me what evidence I would need to support the position. 5. Be explicit about anything unsettled or fact-sensitive. Do not guess. 6. Your training data has a cutoff and SDLT rates and reliefs change at fiscal events. Say so if you are not sure the law is current. POINTS ALREADY KNOWN TO BE UNCERTAIN ON THIS TOPIC - Whether the sale was given wholly or partly in return for the leaseback depends on the documents and the real arrangement. - The market value of a property subject to a leaseback can require specialist valuation evidence. - The source is HMRC guidance, not law. Its view on valuation must be tested against the legislation and the transaction documents. Do not give me a conclusion you cannot support from the provisions above.
Legislation links show Finance Act 2003 as it stood on 2025-11-17. The law may have changed since, and the rules that apply are those in force on the date of your transaction. The official guidance this page is based on is here.
This page was last updated on 1 September 2026
Useful article? You may find it helpful to read the original guidance here: Stamp duty relief when you sell a property and lease it back
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