Stamp Duty Land Tax (SDLT) may apply in connection with the grant of a lease for airspace or roof-space for the installation of solar panels where the landlord is given a right to receive energy in return.

  • This is likely to only affect large commercial installations because there is a £40,000 SDLT notification threshold.
  • It is a developing area for the tax
  • SDLT may also apply to leases for other alternative energy sources.

In a 2014 bulletin HMRC says that:

“The provision of the solar panels themselves does not constitute chargeable consideration for the grant of the lease, if the requirements of paragraph 10 of Schedule 4 FA 2003 (carrying out of works) are met.

However the contractual right given to the landlord to use electricity generated, either free or at a discounted rate, is ‘consideration in money or money’s worth given for the subject-matter of the transaction, directly or indirectly, by the purchaser or a person connected with him’ (para. 1(1) Schedule 4 FA 2003).

This will be ‘consideration other than rent’ (para. 9(1) Schedule 5 FA 2003). The amount of chargeable consideration in this case will be the market value of the right at the effective date of the transaction (para. 7 Schedule 4 FA 2003): that is, the amount for which it could be sold on the open market at arm’s length.

As SDLT is a self-assessed tax it will be the responsibility of the taxpayer to establish that market value and to make any necessary return in the appropriate manner.

In practice most cases this amount will fall below the £40,000 SDLT notification threshold and in these cases no land transaction return will be required (see section 118 FA 2003 and section 272 Taxation of Chargeable Gains Act 1992 for the definition of ‘market value’).A return will be required if the market value exceeds this threshold.

Similar principles will apply where a lease is granted for the erection of wind turbines or for the construction of heating systems covered by the renewable heating incentive (biomass, heat pumps, geothermal, solar thermal collectors, biomethane and biogas) and the electricity or heat generated is then wholly or partly provided to the landlord and/or the tenant of the property.

HMRC is aware that this is a developing area. If a customer is in any doubt about the SDLT implications of a proposed transaction, they should apply to Birmingham Stamp Taxes for written advice."

Links: HMRC SDLT Bulletin 01-2014

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