On 9 July 2014 HMRC published Brief 27/14 setting out a further policy change, and clarification of previous guidance, in light of the 2012 tribunal decision in Robinson Family Ltd.

In summary:

  1. In a change of policy, and following the decision in the Robinson case, HMRC now accept that the surrender of a lease can amount to a TOGC provided the usual conditions are satisfied. For example, a surrender by a tenant of a lease, with the benefit of subtenants, can be a TOGC. The Brief confirms that taxpayers who have within the last 4 years paid too much SDLT on lease surrenders, as a result of SDLT being assessed on consideration that incorrectly included VAT, should make claims for repayment of such SDLT.
  2. HMRC have confirmed that the change of policy originally announced in 2012 following the Robinson case (ie that lease grants could amount to TOGCs) is not restricted to transfers of property rental businesses. In principle a transfer of a retail business involving the grant of a lease could now qualify as a TOGC.
  3. The new Brief clarifies (in part) how the “1% test” for TOGC treatment on lease grants will apply. This test requires that the value of any retained reversionary interest must not exceed 1% of the value of the property immediately before the transfer (ignoring any mortgage or charge). On grant of a lease over part of a building, the test applies only to that part.

To view the HMRC Brief, click here.