Notification: Continuation of a lease: Example 1
A 10-year non-residential tenancy within the Landlord and Tenant Act 1954 is granted from and including 1 December 2005, with annual rent of £50,000 per year. The net present value (NPV) on which tax is paid for this lease is £415,830. The non-residential threshold for NPV on 1 December 2005 was £150,000 and the tax rate 1%. Stamp duty land tax (SDLT) of £2,658 was paid when notification of the grant was made.
The tenant continues in occupation past 30 November 2015 whilst negotiating new terms with the landlord, and the lease continues beyond the fixed term by operation of law.
For SDLT purposes, the lease is treated as being extended by one year, so is now for a term of 11 years from 1 December 2005. The NPV is £450,077. Irrespective of any interim changes in rates, thresholds or reliefs, additional tax due on this 11-year lease is calculated using the rates, thresholds and reliefs in place at 1 December 2005. The additional tax due is:
£450,007 - £150,000 = £300,007
x 1% = £3,000
less already paid £2,658 = £342.
As more SDLT is due, this notional extended lease must be notified within 30 days of the day after the expiry of the previous lease (that is on or before 31 December 2015) and the additional tax paid.
For further details of the treatment of leases continuing beyond their fixed term, refer to SDLTM14070.