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Outline

This guidance note summarises the implications of nominal or peppercorn rents for income tax, corporation tax, CGT, SDLT and VAT purposes with links to further content.

Properties let at a minimal rent are also called nominal leases or peppercorn rents. This is the case where the owner of the property rents the property:

1. •

   at a less than market value rent, or

2. •

   by way of a ‘ground rent’ on a long lease

Both will be taxable as property income. In the former case, an uncommercial rent may also have wider tax implications to consider.

Ground rents are a distinct charge from the leasehold charge. Ground rents will generally be regarded as being charged on commercial terms, even though they are generally negligible (or often not charged or collected) as they do not necessarily relate to any service provided to a leaseholder.

Note that companies within the transfer pricing regime may also have to consider the transfer pricing provisions if a property is let at less than