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HMRC internal manual

Stamp Duty Land Tax Manual

Notification: Continuation of a lease by tacit relocation

In Scotland a lease which comes to the end of its express term shall (if the requisite notice to quit or to remove is not given) continue for up to a year at a time by virtue of the doctrine of tacit relocation (until either party serves the appropriate notice).

Where a lease continues past its original term by tacit relocation, this may give rise to an SDLT charge, or additional SDLT charge, and it may be necessary to notify if:-.

  1. The lease comes within the charge to stamp duty land tax (SDLT), once continued by tacit relocation, as the net present value (NPV) of rents over the original term and the extension exceeds the relevant notification threshold. This applies only to leases which, when granted, were for a term of less than seven years and were not chargeable to SDLT as consideration was below the tax threshold set out at FA03/S55. If, on continuation, the NPV of rents calculated over the extended term increases so that total consideration then exceeds the notification threshold, SDLT will become payable. As explained above, this does not apply to stamp duty leases.
  2. The lease was notifiable on grant and the SDLT payable on the extended lease is greater than that previously notified. This applies where NPV over the extended term increases as at 1. above, but in cases where the original lease was notifiable (because the original term was seven years or more, or was less than seven years but the original consideration exceeded the threshold- see SDLTM18210). Under FA03/SCH17A/PARA3(5) and FA03/S77 (2)(a), it is the term of the lease when granted that is relevant.

Note that such a lease is not notifiable on extension by tacit relocation merely because its term has ‘grown’ to seven years or more.

Where appropriate, notification must be made within 30 days of the day following the expiry date of the previous lease (whether actual or notional). Notification should be by way of letter to Birmingham Stamp Office, (address is available @ HMRC website within the contact us pages) giving details of the original and extended lease terms.

For calculation, irrespective of whether the original lease was for a fixed or indefinite term, the extended lease is treated as having been granted at the time of grant (or deemed grant) of the original lease and NPV calculations should be made on the basis that the extended lease was granted at this time. Any changes in thresholds, rates or reliefs since the date of grant (or deemed grant) have no effect on the tax due. If VAT was not chargeable on the rent at the date of grant (or deemed grant), the fact that VAT has since become payable is ignored.

However, because the extension only takes effect after the expiry of the previous lease, notification and payment need only be made within 30 days of the date of deemed extension of the lease.

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.