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HMRC internal manual

Stamp Duty Land Tax Manual

Term of a lease: Leases treated as continuing after a fixed term


Continuation of occupation after end of fixed term (‘holding over’)

Leases granted for a fixed term ‘and thereafter until determined’ or for afixed term that may continue beyond the fixed term ‘by operation of law’ aretreated for stamp duty land tax (SDLT) purposes as being for the fixed term stated ongrant. Such leases include business tenancies within Part II of the Landlord and TenantAct 1954 (‘LTA’54) which normally continue beyond the contractual term untilthey are terminated or a new tenancy is granted.

A lease will not automatically continue beyond its contractual term if, for example, abusiness tenancy is contracted out of ‘LTA‘54 or a business tenant loses theright to renew the lease. In many cases, a tenant remaining in occupation at the end ofthe contractual term of such a lease may be trespassing, or there may be a tenancy at willor a contractual licence. None of these cases has any implication for SDLT.

However there are SDLT implications in cases where the lease is treated in law ascontinuing beyond its contractual term and rent remains payable, for example:

  • A business tenancy within Part II ‘LTA’54 normally continues beyond its contractual term until it is terminated or a new tenancy is granted.
  • At the end of a business tenancy which is contracted out of Part II ‘LTA’54, or where the right to renew is lost, a new implied lease may arise.
  • For most residential shorthold tenancies granted for an initial fixed term, the end of the contractual term is followed by a statutory periodic tenancy.

Under FA03/SCH17A/PARA3, these leases are treated for SDLT purposes as being for oneyear longer than the original term, irrespective of any other rule or operation of lawwhich determines that they should be extended for a longer or shorter period.

Where the increased net present value of the extended lease gives rise to a charge oradditional charge to SDLT, a return or further return is required This should be submittedby letter to The ComplianceTeam, Birmingham Stamp Office within 30 days of the day after expiry of the previouslease (but refer to note below re: pre-01/12/2003 leases).

Further continuation after prior continuation

If the lease continues after this one year extension, it is treated as being extendedby another year and so on until either a new lease is granted or the lease is determined.In these cases, if a return or further return is required it should be submitted by letterto The Compliance Team, Birmingham Stamp Office within 30 days of the day after expiry ofthe previous lease (that is 1 year, 2 years etc. after the end of the contractual term ofthe original lease).

Leases granted before 1 December 2003

Where a charge or additional charge to SDLT would arise merely because of the extendedterm of a lease under this legislation, it does not apply to leases granted before 1December 2003 which were taxable under stamp duty.