Sale and Leaseback - potential SDLT savings

The careful structuring of a sale and leaseback could save 17.5% in stamp duty land tax costs.

Sale and leaseback transactions which are structured so that the lease is granted after the sale may not be SDLT efficient, because the buyer pays SDLT on the entire purchase price, plus the VAT element. The buyer can make a significant SDLT saving if the lease is granted before the sale is exchanged and completed. This is because for VAT elected properties no VAT is payable where the sale is treated as a transfer of a going concern and so the SDLT cost is 17.5% less than what it would otherwise have been.

The sale needs to be structured as follows:

1. The lease must be granted to a company outside the seller's VAT group before exchange of contracts.