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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 a fixed term that may continue beyond the fixed term ‘by operation of law’ are treated for SDLT purposes as being for the fixed term stated on grant. Such leases include business tenancies within Part II of the Landlord and Tenant Act 1954 (‘LTA’54) which normally continue beyond the contractual term until they are terminated or a new tenancy is granted.

A lease will not automatically continue beyond its contractual term if, for example, a business tenancy is contracted out of ‘LTA‘54 or a business tenant loses the right to renew the lease. In many cases, a tenant remaining in occupation at the end of the contractual term of such a lease may be trespassing, or there may be a tenancy at will or 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 as continuing 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 one year longer than the original term, irrespective of any other rule or operation of law which 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 or additional charge to SDLT, a return or further return is required This should be submitted by letter to Stamp Taxes within 30 days of the end of the first year of holding over unless a renewal lease is entered into during that year (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 extended by 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 letter to Stamp Taxes within 30 days of the end of the latest year of holding over.

Leases granted before 1 December 2003

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