Businesses which rent their premises should remember that a lease due to run for more than seven years must be registered.
And they are also being reminded that a Stamp Duty Land Tax (SDLT) return must be submitted to HMRC if they are to avoid heavy penalties.
Mary Hoffman, director of legal services at Swindon-based Optimum Professional Services, said the team are currently helping a client whose ten year lease wasn’t registered with the Land Registry by the solicitor acting for the client on the grant of the lease, nor was a return made for SDLT, resulting in a penalty being imposed by HMRC.
“If a lease is to run for seven or more years it has to be registered with the Land Registry,” said Mary. “A Stamp Duty Land Tax return also has to be completed, even if no stamp duty is owing.
“In the case of our client, she wasn’t liable to pay any stamp duty but she has been issued with a penalty of £400 from HMRC for not sending in a return. Had she been liable to tax as well, HMRC could well claim interest as well as the tax which is owing.”
Mary said the issue came to light when the client went to sell her business and transfer the lease to the buyer. “What should have been straightforward has become more complicated because when she opened the business and moved into the premises these two important requirements – registering with the Land Registry and completing the SDLT return – weren’t carried out.”
As well as registering with the Land Registry and submitting a stamp duty return, Mary business said businesses should go through a checklist before signing any lease on their commercial property.
This should include carefully checking any repair and maintenance responsibilities; arranging for a survey to be carried out and a schedule of condition to be prepared; seeking legal advice before agreeing the heads of terms; and considering including a break clause.
Mary added: “A break clause allows a business to end the lease before the full term has expired but strict procedures for exercising the break clause must be incorporated into the lease and expert advice is essential.”