Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017 section Schedule 6 paragraph 20

Agreement for lease substantially performed

Schedule 6 paragraph 20 explains how land transaction tax applies when an agreement for a lease is substantially performed (for example, the tenant takes possession or starts paying rent) before the formal lease is actually granted.

• When an agreement for a lease is substantially performed before the formal lease is granted, the agreement is treated as if it were a lease (the "notional lease") from the date of substantial performance, and LTT becomes due at that point.
• Once the formal lease is subsequently granted, the notional lease is recalculated to cover the full term of the actual lease, using the total rent and any other consideration for the entire period, and the formal lease grant itself is generally disregarded for LTT purposes.
• The notional lease and the actual lease are treated as linked transactions, and the tenant under the actual lease is responsible for any additional tax arising from the recalculation of the notional lease.
• If the agreement is rescinded, annulled, or otherwise not carried into effect within 12 months of the date of substantial performance, and the LTT return is amended accordingly, the Welsh Revenue Authority must repay any tax that was paid.