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HMRC internal manual

Stamp Duty Land Tax Manual

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HM Revenue & Customs
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Term of a lease: Leases treated as continuing after a fixed term: Example 1

A 10 year non-residential lease within the Landlord and Tenant Act 1954 comes to the end of its express term on 24 March 2015. The tenant remains in occupation whilst they negotiate a new lease with the landlord. The annual rent was a fixed £60,000 per annum for the whole lease term and this remains payable after 24 March 2015 whilst negotiations continue.

The lease was originally granted on 25 March 2005 and notified on 20 April 2005. The net present value (NPV) of the rent was originally returned as £498,996 and stamp duty landtax (SDLT) of £3,489 was paid.

On 25 March 2015 (the day after the original express term ended), the lease is treated as being for one year longer than its express term, that is a lease for 11 years granted on 25 March 2005. The NPV of the rent for this notional 11 year lease is £540,093 and stamp duty land tax of £3,900 is due. However, as £3,489 has already been paid, the net additional stamp duty land tax due is £411. This should be returned on a letter to The Compliance Team, BirminghamStamp Office, giving details of the original notification and payment and the new tax calculation. The notification should be made by 23 April 2015, that is within 30 days of the notional extension of the lease.

Negotiations have not finished by 24 March 2016 and, as the tenant is still in occupation,the lease is again treated as extended by a further year from 25 March 2016, that is, itis now treated as a lease for 12 years, granted on 25 March 2005. The NPV of the rent for this 12 year lease is £579,800 and SDLT of £4,298 is due. As £3,900 has already been paid (the £3,489 on original notification on 20 April 2005 and the additional £411 around 25 March 2015), the net additional SDLT due is £398. This should be returned on a letter to Birmingham Stamp Office, giving details of the previous notifications and payments and the new tax calculation. The notification should be made by 23 April 2016,that is within 30 days of the notional further extension of the lease.