Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017 section Schedule 6 paragraph 19

Deposits and loans in connection with lease grants and assignments

Section Schedule 6 paragraph 19 deals with the treatment of deposits and loans connected with the grant or assignment of a lease, which may be treated as taxable consideration for Land Transaction Tax purposes.

• Where a tenant (or connected person) pays a deposit or makes a loan in connection with a lease grant, and repayment depends on the tenant's actions or death, the full amount is treated as non-rent consideration for LTT purposes.
• The same rule applies where an assignee (or connected person) pays a deposit or makes a loan in connection with a lease assignment, with repayment contingent on the assignee's actions or death.
• A deposit is exempt from this treatment if it does not exceed twice the highest annual rent payable in any 12-month period during the first five years of the lease term (or remaining term, in the case of an assignment).
• No additional tax arises solely because the deposit or loan amount triggers the removal of the zero rate band for non-residential leases where annual rent is £1,000 or more.