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HMRC internal manual

Stamp Duty Land Tax Manual

Term of a lease: Treatment of indefinite term leases continuing

Should an indefinite term lease be encountered which continued after its notional initial term of one year (see SDLTM18718), their treatment for stamp duty land tax (SDLT) purposes is similar to that of fixed term leases which continue by tacit relocation: under FA03/SCH17A/PARA4, they are treated as a lease for a term of two years from the date of grant (or deemed grant), being one year longer than the initial notional term.

Where SDLT was chargeable on the initial 12-month lease, the total net present value (NPV) of rents will increase with the extension of the notional term so that a revised return will be required.

Where no SDLT was initially chargeable, the extended term may bring the total NPV within charge so that notification and a return is required. This should be made by letter to Birmingham Stamp Office (See HMRC contact us pages) within 30 days of the day after expiry of the notional first 12-month term.

If the lease continues after the two-year term has expired, it is then treated as a notional lease for three years from the date of grant (or deemed grant), with notification or revised return (if required) as before.

If the lease continues after the three-year term has expired, it is treated as a notional lease for four years from date of grant (or deemed grant) and so on, until the lease is determined or a new lease is granted.

Note that a lease for an indefinite term will not come within the notification requirements merely because its notional term has been extended to seven years or more, as notification is only required when the lease, when granted, is for a term of seven years or more and the grant is for chargeable consideration. See FA03/S77 (2) (a).