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HMRC internal manual

Stamp Duty Land Tax Manual

Term of a lease: Holding over

A business lease in England and Wales normally continues after the end of its contractual term by operation of law until terminated by notice, unless the parties contract out of Part II of the Landlord and Tenant Act 1954.

For stamp duty land tax (SDLT) purposes, this period of remaining in occupation or‘holding over’ is initially treated as an extension of the original lease by one year. Generally, any continuation of occupation after the express term of the lease has finished is dealt with similarly.

Leases granted (or treated as granted) before 1 December 2003

Where the original lease was granted before 1 December 2003 and was taxable under stamp duty, although the lease is treated as being extended, there are no further stamp duty or SDLT implications solely because the term of the lease has been extended after implementation of SDLT.

There may, however, be SDLT consequences if other variations occur, for example in the amount of rent charged. Refer to SDLTM15000.

Leases granted (or treated as granted) on or after 1 December 2003

Where the original lease was granted on or after 1 December 2003 and was taxable under SDLT rules, the extended lease is also taxable under these rules.

This may make a difference to the tax payable on the rental amount as the net present value of the rent will be increased by the additional year’s rent. Where there is such a tax difference, this should be notified to HM Revenue & Customs, by way of letter to The Compliance Team,Birmingham Stamp Office, giving sufficient information to identify the original return, land, parties to the transaction and the additional tax due and how it has been calculated. Where the period of holding over extends into a second or subsequent year, the same calculation should be made and notification given each year there is more tax due.Notification of these holding over periods is only required when more tax is due. Refer to SDLTM14060 for more information about treatment of such leases.